LIBRARY 

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Accession 98789 •    Clas>s 


Bourne.     Octavo,  cloth i   25 

25 — The  American  Caucus  System.  By  George  W.  Lawton. 
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QUESTIONS  OF  THE  DAY. 

54 — Relation  of  the  Tariff  to  Wages.  By  David  A.  Wells.  Oc- 
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58 — Politics  as  a  Duty  and  as  a  Career.  By  Moorfield  Storey, 
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cloth.     Third  edition,  revised  and  enlarged.         .         .      i   50 

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and  Laborer.     By  Hon.  Porter  Sherman.     Paper     .  25 

66 — The  Death  Penalty.  A  Consideration  of  the  ObjectionsUo 
Capital  Punishment.  By  Andrew  J.  Palm.  New  edition 
in  preparation. 

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and  Mary  College     .  .  .  .  .  .  .  i   00 

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Ehrich.     Paper,   40   cents;    cloth      .         .         .         .  75 

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"The  Industrial  Situation,"  etc.     Octavo,  cloth ..  .      i    50 

74— The  Silver  Situation  in  the  United  States.  By  Prof.  F.  W. 
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the  United  States.  By  Clement  Juglar.  Translated  by  De 
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Commercial  Trusts 

THE  GROWTH   AND   RIGHTS  OF 
AGGREGATED  CAPITAL 

AN  ARGUMENT  DELIVERED  BEFORE  THE  INDUSTRIAL 

COMMISSION  AT  WASHINGTON,  D.C. 

DECEMBER  12,  1899 

CORRECTED  AND  REVISED 


BY 
JOHN  R.  DOS  PASSOS 

OF  THE  NEW  YORK  BAR 

AUTHOR   OF   "  STOCK  BROKERS  AND  STOCK  EXCHANGES' 
*'tHE  interstate  COMMERCE  ACT,"   ETC.,  ETC, 


G.  P.  PUTNAM'S  SONS 

NEW  YORK  &  LONDON 

Zbc  •RnicKerbockec  press 

1901 


tfi^ 


<^*?1 


GENERAL 

Copyright,  igoi 

BY 

JOHN  R.  DOS  PASSOS 


"^be  •Rnicfterbocftcr  ^^re80,  flew  lj)orf{ 


ANALYSIS    OF   CONTENTS 

PAGE 

First. — Preliminary  remarks i 

I.  Hasty  and  ill-considered  legislation 
upon  the  subject  of  trusts  depre- 
cated          4 

1^  II.  The  theory  and  object  of  legislation 

explained 7 

Second. — rDefinition  of  a  trust ic^ 

L,,      I.  Meaning,     history    and     object    of 

ti;iists 12- 

II.  Form  and  substance  of  trusts  con- 
trasted          15 

Third. — Objections    to    aggregations    of 

capital  considered 17 

I.  Should  amount  of  capital  employed 

in  any  business  be  limited? 19 

(a)  As  to  individuals 21 

(6)  As  to  corporations 21 

^  II.  Should   the   uses  of   capital   be  re- 
stricted?         23 

III.  Does    aggregated    capital    create    a 

^  monopoly? 26 

IV.  Definition  of  "monopoly" 27 

iii 


98789 


iv  Contents 

PAGE 

Fourth. — History  of  the  rise  and  growth 

of  aggregated  capital 33 

I.  Partnerships 34 

II.  Limited  partnerships 37 

III.  Commercial  corporations 39 

IV.  Nature  and  functions  of  corporations  41 
V.  The  method  of  raising  capital  by  cor- 
poration bonds  and  stock  explained  46 

VI.  Over-capitalization 50 

(a)  Of  railroads 55 

(6)  Should  the  basis  of  the  capitali- 
zation of  corporations  be  actual, 
tangible  property ;  or  their  earn- 
ing power? 56 

Fifth. — Do  aggregations  of  capital  create 

monopolies  ? 60 

I.  Should  aggregated  capital  be  regu- 
lated by  legislation? 62 

II.  Are  not  the  natural  laws  of  business 
sufficient  safeguards  against  en- 
croachments of  capital? 63 

III.  Legislation  against  corporations  af- 

fects thousands  of  stockholders — 
not  the  promoters,  capitalists  or 
bankers,  or  monopolists 63 

IV.  Impossibility  of  controlling  natural 

operations  of  trade  or  evolutions  of 
business  by  written  laws 67 


Contents  v 

PAGE 

V.  Historical  and  legal  precedents  that 
legislation  cannot  control  natural 

laws 72 

(a)   History  of  laws  relating  to  fore- 
stalling, regrating,  etc 73 

(6)   History  of  laws  relating  to  legal 

monopolies 74 

{c)   Speculations  in  gold 83 

(d)  Federal   and    State   legislation 
against  trusts 84 

(e)  Judicial    decisions    upon    trust 
questions 86 

(/)   Is  legislation  necessary  to  regu- 
late trusts  ? SS 

Sixth. — The  evils  of  trusts 98 

Seventh. — If  further  legislation  is  neces- 
sary, which  shall  it  be — Federal  or 

State? 105 

The  doctrine  of  "  State  rights  " 113 

Eighth. — Existing  remedies  applicable  to 

corporations  analyzed 119 

I.  In  favor  of  public 119 

II.      **         **    the  stockholders 126 

III.      "  "      •'  State *  128 

Ninth. — The  influences  and  necessity  of 
protecting  individual  wealth  and 
property 132 


INTRODUCTION 

LARGE  aggregations  of  capital,  concen- 
trated in  the  hands  of  corporations, 
are  called  "trusts."  In  form,  the  difference 
between  a  corporation  possessing  a  large,  and 
another  a  small,  capital  is,  however,  only  one 
of  degree;  but  in  principle  the  difference 
may  be  very  deep  and  important,  and  lead 
to  grave  results. 

The  Courts  of  this  country,  applying  the 
old  and  effete  rules  of  monopoly  or  public 
policy,  have  almost  unanimously  declared 
these  so-called  "trusts"  illegal.  But  in  the 
contest  between  the  technical  principles  of 
law  and  the  progress  of  trade  the  law  has 
succumbed,  and  the  trusts  have  multiplied 
with  great  rapidity. 

Whether  the  operations  of  natural  laws 
will  be  a  sufficient  check  on  these  mam- 
moth commercial  consolidations  for  the 
protection  of  the  people;    or  whether  it  is 


r 


viii  Introduction 

necessary  to  regulate  them  by  express  legis- 
lation;  behold  the  problem! 

The  argument  which  is  herewith  pre- 
sented to  the  public  was  delivered  before 
the  Industrial  Commission,  at  Washington, 
December  12,  1899.  I  claim  for  it  the 
merit  of  frankness  and  independence  of 
thought  and  expression. 

The  growth  and  development  of  these 
colossal  combinations  of  trade  demand  con- 
stant and  close  attention. 

A  few  years'  more  experience  with  them 
will  show  whether  they  are  good  or  evil,  to 
the  laborer,  the  producer,  the  manufacturer, 
the  purchaser.  In  the  meantime  the  discus- 
sion is  going  on;  and  in  the  hope  that  my 
views  may  throw  some  light  upon  the  sub- 
ject, I  have  presumed  to  give  them  greater 
publicity. 

John  R.  Dos  Passos. 

New  York,  October,  1901. 


COMMERCIAL  TRUSTS 


COMMERCIAL  TRUSTS 


Mr.  Chairman  and  Gentlemen  of  the 

Commission: 
I  APPEAR  before  you  this  morning  to 
^  make  some  observations  upon  the  legal 
and  historical  aspect  of  the  question  of  the 
aggregation  of  capital ;  whether  that  capital 
be  represented  in  money,  in  goods  or  in 
labor.  Because  of  its  immaturity,  I  am 
here  to  endeavor  to  rescue  this  subject  from 
the  domain  of  law,  where  it  does  not  belong, 
and  to  place  it  in  the  field  of  speculation  and 
thought  and  political  economy,  where  it  does 
belong. 

I  appear  here  as  the  representative  of  no 
corporation,  of  no  aggregated  interest  or 
of  no  individual,  and  the  opinions  preliminary 
and  views  which  I  shall  have  the  R«"»ark8. 
honor  to  express  are  entirely  my  own;  I 
alone  am  responsible  for  them.     They  are 


2  Commercial  Trusts 

made  without  consultation  with  anybody, 
and  whatever  criticism  may  arise  from  the 
observations  which  I  shall  address  to  you 
must  therefore  fall  upon  me  alone. 

I  congratulate  the  country  that  this  great 
and  interesting,  not  to  say  absorbing,  ques- 
tion has  fallen  at  last  into  a  legitimate  place 
of  discussion,  and  that  this  Commission, 
composed  of  individuals  chosen  from  all  the 
walks  of  life,  is  to  sit  and  to  hear  everything 
that  anybody  wishes  to  say,  and  to  report 
its  conclusions  upon  the  facts  in  shape  for 
definite  action.  I  regard  it  as  of  the  great- 
est importance  to  this  country  that  ques- 
tions of  this  kind  should  primarily  pass 
through  the  ordeal  of  a  Commission.  If 
they  are  left  exclusively  in  the  hands  of  poli- 
ticians, very  much  is  said  of  an  extravagant, 
emotional  and  sensational  character,  and 
the  results  which  accrue  from  such  a  method 
of  inquiry  and  examination  are  in  a  general 
way  unsatisfactory  to  the  reasonable,  think- 
ing people,  and  to  the  important  business 
interests  of  the  country.     Whatever  is  fil- 


Preliminary  Remarks  3 

tered  through  this  Commission,  I  believe, 
after  its  exhaustive  and  laborious  study  of 
the  questions  involved,  will  be  of  service  to 
the  whole  country. 

Another  observation  in  respect  to  this 
Commission  which,  it  seems  to  me,  I  should 
be  remiss  if  I  did  not  allude  to.  It  is  not 
often  that  I  am  in  the  position  to  praise  legis- 
lation; but  I  can  commend  the  statute  by 
virtue  of  which  you  occupy  your  official 
positions  here,  not  only  in  its  substance,  but 
as  to  the  language  used  therein.  Certainly 
the  language  of  the  act  under  which  you 
are  appointed,  and  are  working,  is  most  ad- 
mirable. It  is  brief,  and  charges  you  with 
the  examination  of  the  two  great  proposi- 
tions that  arise  out  of  this  important  subject, 
namely : 

"  §  2.  It  shall  be  the  duty  of  this  Commis- 
sion to  investigate  questions  pertaining  to 
immigration,  to  labor,  to  agriculture,  to 
manufacturing  and  to  business,  and  to  report 
to  Congress  and  to  suggest  such  legislation 
as  it  may  deem  best  upon  these  subjects." 


4  Commercial  Trusts 

"It  shall  furnish  such  information  and 
suggest  such  laws  as  may  be  made  a  basis  for 
uniform  legislation  by  the  various  States  of 
the  Union,  in  order  to  harmonize  conflicting 
interests,  and  to  be  equitable  to  the  laborer, 
the  employer,  the  producer  and  the  con- 
sumer.*' 

Yet,  is  not  this  act  an  extraordinary  com- 
mentary upon  the  way  laws  are  made  in 
Hasty  and  111- this  great  country,  which  we,  in 
L°eg?8iat?on  Hiomcnts  of  admiratiou  and  en- 
Deprecated.  ^husiasm,  are  prone  to  call  the 
leading  nation  of  the  world,  in  its  civiliza- 
tion, in  its  progress  and  in  all  the  elements 
which  make  up  a  great  nation?  Is  it  not  a 
remarkable  comment  upon  that  civilization 
and  upon  our  methods  of  legislation  that 
nine  or  ten  years  after  a  law  has  been  passed 
by  the  Congress  of  the  United  States,  a  Com- 
mission is  created  for  the  purpose  of  inquir- 
ing whether  any  laws  are  necessary  upon 
that  particular  subject?  Making  the  laws 
first,  and  inquiring  into  their  necessity  after- 
wards!   Plutarch  states  that  a  Locrian  who 


Hasty  Legislation  Deprecated     5 

submitted  legislation  stood  up  in  the  tem- 
ple with  a  rope  around  his  neck,  prepared 
to  be  strangled,  if  his  proposed  law  was  not 
adopted  *  Would  such  a  prospect  discour- 
age a  modem  legislator  with  a  new  speech 
to  deliver  and  a  new  project  to  propose? 

I  say  to  you  to-day,  not  in  any  spirit  of 
sensationalism,  but  from  a  sincere  belief  and 
conviction,  that  if  the  laws  could  be  piled 
together,  in  some  place  capable  of  holding 
them — the  laws  which  have  been  enacted 
since  1848,  when,  under  the  guise  of  law  re- 
form, ill-considered  codification  was  intro- 
duced into  this  country  and  a  weed  thus 
planted  in  our  judicial  and  legal  system, 
which  has  overgrown  and  hidden  from  view 
the  real  and  simple  purposes  of  justice  and 
law — I  say  that  the  man  who  could  put  a 
match  to  this  accumulation  of  verbiage, 
duplication  and  multiplicity  of  laws  and  let 
them  bum,  is  entitled  to  a  monument  at  the 
hands  of  the  American  people  for  ridding 

♦The  Epizephrian  or  Italian  Lcx:rians.  See  Grote, 
Vol.  III.,  510. 


6  Commercial  Trusts 

them  of  statutes  and  useless  books,  and 
bringing  them  back  to  a  condition  where 
simpHcity  and  science  would  go  hand  in 
hand  towards  producing  satisfactory  and 
prompt  judicial  results. 

Let  me  make  one  more  preliminary  ob- 
servation before  going  into  the  questions 
which  I  shall  discuss.  When  public  matters 
are  discussed  in  this  country,  the  great  ques- 
tion, or  the  great  cry,  rather,  always  is  ''leg- 
islation," ''legislation,"  "we  want  more 
laws,"  and  the  inquiry  is  pushed  in  that 
line,  until  each  political  party  is  in  a  race  to 
outdo  the  other  in  making  statutes^ — and 
this  is  called  legislation ;  and  these  statutory 
enactments  are  made  in  order  to,  appease 
what  they  consider  to  be  the  predominating 
sentiment  of  the  hour.  In  this  aspect  one 
party  is  no  worse  than  the  other.  They 
are  both  the  same;  in  the  general  method 
of  treating  public  questions,  and  in  their 
superficial  mode  of  legislation. 

Now,  it  is  necessary  for  me  to  remind  you 
of  what  is  involved  in  legislation.     Proper 


Legislation  Explained  7 

legislation  requires  that  before  a  statute  is 
passed  by  the  law-making  body  its  subject- 
matter  should  be   thoroughly   un-  The  Theory 

I         TTT  .         •  1         j^      ^^^  Object  of 

derstood.  We  must,  m  order  to  Legislation 
have  complete  and  thorough  legis-  ^""^  **°*  ' 
lation,  go  back  to  the  basis  of  the  social  or- 
ganization; and  no  legislation  can  be  satis- 
factory unless  it  is  examined  in  that  aspect. 
You  must  understand  the  relation  that  a 
citizen  occupies  to  the  Government  before 
you  can  legislate,  and  you  must  be  fully  con- 
vinced that  legislation  is  necessary. 

These  views  are  elementary  and  academic, 
but  it  is  necessary  to  treat  questions  of  this 
description  in  that  way  in  order  that  we 
may  arrive  at  a  proper  result ;  and  I  ask  you 
this  morning  to  go  back  to  the  supposed 
origin  and  basis  of  political  society  to  dis- 
cover whether  any  additional  legislation  is 
needed. 

No  one  can  trace  back  to  its  origin,  human 
society ;  but  we  all  have  defined  views  upon 
the  subject,  and  the  deductions  of  writers 
like     Montesquieu    and     Burlamaqui,    and 


8  Commercial  Trusts 

others,  who  have  paid  attention  to  ques- 
tions of  the  spirit  and  nature  of  laws,  are 
generally  accepted. 

When  a  man  is  born  into  the  world,  it  is 
assumed  that  he  bargains  with  some  govern- 
ment for  citizenship;  that  is  the  accepted 
origin  of  society.  He  says  to  the  govern- 
ment, *'I  will  give  you  my  allegiance,  I  will 
give  you  my  fealty,  in  return  for  protec- 
tion," which  organized  society,  a  necessary 
condition  of  human  existence,  accepts,  and 
affords  him  and  his  property  protection. 
This  is  a  crude  description  of  the  social 
compact. 

Now,  what  does  this  compact  mean?  It 
is  called  political  or  civil  liberty;  which  a 
celebrated  authority  defines  to  be  ''the  nat- 
ural liberty,  so  far  restrained  by  human  laws 
(and  no  further)  as  is  necessary  and  expedi- 
ent for  the  general  advantage  of  the  public." 
Here  is  a  distinct  and  clear  contract,  on  the 
part  of  the  government,  not  to  intrude  upon, 
or  molest,  the  natural  liberty  of  man,  except 
in  cases  of  plain  and  paramount  necessity. 


Legislation  Explained  9 

Now,  mark  you.  Every  law  that  you 
make  is,  as  it  were,  a  nail  in  the  coffin  of 
natural  liberty.  The  object  of  government 
is  not  to  make  laws;  the  object  of  govern- 
ment is  to  avoid  making  laws — the  very 
reverse  to-day  of  a  legislator's  habits.  And 
no  law  should  be  made,  which  looks  to  the 
combined  interests  of  the  citizen  and  the  gov- 
ernment, unless  these  primary  principles  are 
adhered  to.  First,  you  must  be  convinced 
that  a  real  necessity  requires  a  law  to  be 
made.  You  must  examine  into  the  causes; 
you  must  know  the  mischief  that  you  seek 
to  avoid  or  prevent,  before  your  hand  takes 
the  pen  to  write  a  law  which  takes  away 
the  natural  liberty  of  mankind. 

If  these  principles  were  only  thought  of, 
and  all  questions,  which  were  to  be  the 
subjects  of  law,  should  be  impartially  and 
thoroughly  considered,  much  unnecessary 
legislation  would  be  avoided,  and  the  con- 
dition of  this  country,  so  far  as  its  legal 
affairs  are  concerned,  would  be  very  much 
better. 


lo  Commercial  Trusts 

Gentlemen,  but  one  more  word  prelimi- 
narily to  the  main  subject,  which  I  shall  now 
touch. 

Before  we  discuss  any  subject,  it  is  neces- 
sary that  we  should  understand  each  other 
Definition  ^^  to  tcrms ;  we  should  agree  as 
ofa  "Trust."  ^Q  thc  issuc  involvcd — the  pri- 
mary matter  which  we  are  brought  together 
to  consider,  and  hence,  there  is  a  necessity 
to  have  a  definition.  A  definition  is  an  ab- 
solute prelude,  a  sine  qua  non,  to  a  proper 
discussion  of  any  subject,  whether  it  is  legal, 
moral,  religious  or  otherwise,  because  with- 
out definitions  men  can  never  get  together 
in  an  argument  or  agree  as  to  the  point 
involved.  They  cannot  understand  each 
other. 

Mr.  Locke,  the  great  philosopher,  has  re- 
marked that  half  the  disputes  which  sepa- 
rate mankind  have  arisen  simply  from  a 
neglect  to  define  terms  and  premises. 

Now,  there  is  the  word  **  Trusts,"  used  in 
the  discussion  of  the  question  of  aggregated 


Definition  of  a  ** Trust**        n 

capital,  and  that  word  is  heard  so  frequently, 
in  this  country,  that  it  has  become  a  term 
for  aggregated  capital — has  become  a  phrase, 
representing  all  of  the  forms  of  combined 
capital. 

We  must  exclude  from  this  discussion 
words  and  phrases  that  are  useless  and 
meaningless,  or  we  can  make  no  intelligent 
progress.  A  ''trust,"  in  its  legal  sense,  ac- 
cording to  Judge  Story,  an  authority  on 
equity  jurisprudence,  is  an  equitable  inter- 
est which  a  man  has  in  personal  or  real  prop- 
erty; and  the  history  of  trusts,  if  anybody 
is  disposed  to  go  back  to  study  the  origin  of 
them,  will  be  found  to  have  arisen  out  of  an 
evasion  of  some  of  the  principles  of  the  feudal 
law.  But,  in  the  sense  in  which  the  term 
"trust"  has  been  used,  so  far  as  it  has  been 
technically  and  legally  used,  for  the  last  two 
hundred  years,  it  means,  as  Judge  Story 
has  said,  an  equitable  right  in  personal  or 
real  property.  That  is,  it  assumes,  that  the 
trustee,  who  is  the  person  controlling,  or 
the  physical  custodian  of  the  corpus  of,  the 


12  Commercial  Trusts 

real  or  personal  property,  is  the  legal  owner, 
while  the  person  really  interested  is  called 
the  cestui  que  trust,  or  the  beneficiary.  He, 
the  latter,  is  the  actual  owner.  The  trustee 
is  the  one  given  the  legal  title,  but  he  has  no 
duty,  except  to  carry  out  the  terms  of  the 
trust,  whereas  the  actual  owner  is  the  bene- 
ficiary ;  and  although  the  title  is  not  in  him, 
he  can  call  upon  the  trustee  at  any  time,  ac- 
cording to  the  terms  of  the  trust  instrument, 
to  account  for  and  fulfil  the  mission  of  the 
trust. 

In  applying  that  word  ''Trust"  to  the 
question  of  aggregated  capital,  about  which 
Meaning,  ^  shall  spcak,  it  means  this:  as- 
objectof "**  sume  that  certain  persons,  called 
••Trusts."  ^  syndicate,  desire  to  become 
the  owners  of  some  manufacturing  business, 
or  commercial  enterprise  which  is  owned  by, 
say,  six  corporations;  having  bought  the 
shares  of  these  companies,  they  get  together 
and  they  make  what  is  called  a  trust  deed, 
or  a  trust  agreement.  That  trust  agree- 
ment  recites   the   terms   under   which   the 


History  of  Trusts  13 

securities  are  held;  that  is,  the  stock,  the 
shares  of  these  six  constituent  companies, 
are  taken  and  placed  in  the  hands  of  a  trus- 
tee, who  has  no  actual  or  real  ownership, 
except  that  he  is  the  custodian — the  shares 
belong,  accordingly,  to  the  trustee,  to  ad- 
minister the  trust.  That  was  the  object  of 
a  trust,  so  far  as  it  applied  to  the  modern 
aggregation  of  capital.  Let  me  try  to  make 
this  subject  perfectly  clear.  All  of  the  stock 
of  the  six  corporations  is  deposited  with, 
say,  one  person,  and  that  person  issues  re- 
ceipts, called  trust  certificates,  by  which  the 
persons  receiving  the  trust  certificates  are 
entitled  to  a  defined  interest,  as  therein 
stated,  in  the  properties  of  those  six  com- 
panies, whose  shares  have  been  lodged  with 
the  trustee. 

A  trust  was  not  a  novel  proposition,  when 
it  was  recently  introduced  into  dealings  for 
the  control  of  certain  businesses.  It  was 
the  application  of  an  old  principle  of  law  to 
new  conditions.  The  object  of  it  was  this: 
to  keep  people,  who  had  no  business  to  know, 


14  Commercial  Trusts 

from  discovering  the  secrets  of  that  trust, 
and  of  the  business  which  it  controlled.  That 
is  the  object  of  a  trust  (a  perfectly  innocent, 
and  a  perfectly  laudable  object,  in  my  esti- 
mation). If  persons  interested  in  a  certain 
business  had  formed  one  corporation  and 
put  the  six  constituent  companies  into  one 
corporate  body,  it  would  have  been  heralded 
to  the  world,  and  all  persons  would  have  had 
the  right  to  go  into  the  County  Clerk's  office, 
or  the  office  of  some  officer,  entitled  and  au- 
thorized to  receive  those  papers,  and  to  look 
at  them;  the  object  of  the  creation  of  the 
trust  was  to  avoid  that  publicity,  and  there- 
fore they  had  a  trust  agreement,  which  was 
deposited  in  the  safe  of  the  trustee,  and  no- 
body knew  anything  about  it,  except  the 
beneficiaries — that  is,  the  persons  holding 
the  trust  certificates. 

Now,  if  the  learned  Chairman  here  had  an 
interest  in  one  of  these  companies,  he  would 
have  received  a  stock  or  a  trust  certificate, 
and  that  trust  certificate  would  have  en- 
titled him  to  have  received,  at  the  proper 


History  of  Trusts  15 

time,  dividends,  if  any  were  earned,  and  ul- 
timately to  receive  his  proportion  of  the  prin- 
cipal. That  would  have  been  the  interest 
of  the  holder. 

The  beneficiary,  or  the  cestui  que  trust,  or 
holder  of  the  trust  certificate,  had  at  all 
times,  the  right  to  walk  into  a  court  of  equity, 
and  demand,  that  all  of  the  business,  con- 
ducted by  the  trust,  should  be  laid  open  to 
him  and  that  all  information  pertaining  to 
it  should  be  accessible  to  his  inquiries.  As 
to  him,  therefore,  there  was  no  secrecy  be- 
yond what  he  chose  to  allow ;  as  to  the  gen- 
eral public,  there  was  secrecy — such  secrecy 
as  is  incident  to  and  necessary  in  the  transac- 
tion of  any  business,  private  or  corporate. 

The  only  two  large  industrial  corpora- 
tions which  resorted  to  that  system,  which 
I  will  call  ancient  procedure  and  ancient 
law,  were  the  Standard  Oil  and  the  Sugar 
Trust.  Through  the  enforced  decrees  of 
courts,  which  declared  such  trusts  monop- 
olies and  against  public  policy,  they  gave  up 
the  form  of  trusts,  and  they  assumed  the 


1 6  Commercial  Trusts 

form  of  corporations,  and  when  the  Sugar 
Trust  divested  itself  of  this  exterior  gar- 
ment, and  when  the  Standard  Oil  Company 
divested  itself  of  its  exterior  garment,  known 
as  a  trust,  it  did  not  affect  the  vital  body,  it 
did  not  affect  the  corpus;  it  did  not  affect 
the  real,  substantial  objects  involved  in  the 
trust,  but  they  simply  put  on  other  suits  of 
clothes,  and  appeared  in  the  community  in 
the  new  garments. 
As  Burke  says,* 

"While  you  are  discussing  fashion,  the  fashion 
is  gone  by.  The  very  same  vice  assumes  a  new 
body.  The  spirit  transmigrates,  and  far  from 
losing  its  principle  of  life  by  the  change  in  its 
appearance,  it  is  renovated  in  its  new  organs 
with  the  fresh  vigor  of  juvenile  activity.  It 
walks  abroad;  it  continues  its  ravages  whilst 
you  are  gibbeting  the  carcass,  or  demolishing 
the  tomb." 

So  the  word  "trust"  may  be  made  to  dis- 
appear and  in  fact  has  been  discarded  in  the 
discussion  of  these  questions,  now  and  for- 

*  Reflections  on  the  Revolution  in  France,  Vol.  V., 
P-  259- 


Aggregations  of  Capital         1 7 

ever;  because  the  courts  have  set  their  seal 
of  condemnation  upon  that  form  of  consoH- 
dation,  and  they  require  that  people  who 
have  in  view  the  aggregation  of  capital  shall 
now  consummate  it  through  the  instrumen- 
tality of  a  corporation;  and  in  discussing 
these  questions  we  must  dismiss  this  word 
"trust"  as  meaningless  and  useless. 

Of  course,  I  have  been  speaking  of  the 
mere  form  which  the  transaction  assumed. 
In  substance  this  bringing  together  of  busi- 
nesses was  intended  to  avoid  competition — 
to  save  useless  expenses ;  and  in  most  cases 
the  real  object  of  the  consolidation  was  to 
control  the  particular  business  involved  by 
concentrating  it  under  one  management. 

We  then  arrive  at  the  question  as  to  what 
was  the  meaning  and  intent  of  Congress  in 
the  appointment  of  this  Commis-  objections  to 
sion ;  and  what  is  the  meaning  and  ^^o7capitai 
intent,  of  the  public  discussion,  Considered, 
which  has  gone  on  from  one  end  of  this 
country  to  the  other,  upon  the  question  of  ag- 
gregated   capital.      It    means,   so  far  as  I 


1 8  Commercial  Trusts 

comprehend  the  question  —  and  I  want  to 
state  it  as  broadly  as  possible,  so  that  not  even 
the  most  dilettante  critic  can  find  fault  with 
the  statement — that  certain  organizations,  or 
certain  people,  or  certain  writers,  contend 
that  the  aggregation  of  capital,  or  aggrega- 
tions of  business,  is  pernicious  or  detrimen- 
tal to  the  public  welfare,  and  the  public  good, 
and  they  therefore  ask  this  Commission,  as 
they  have  asked  the  courts,  under  the  legis- 
lation which  is  already  existing,  to  come 
forward  and  help  to  forever  stifle  this  alleged 
evil. 

They  say  all  ''big  businesses"  are  bad; 
but  ** small  ones"  are  all  right.  The  same 
class  of  critics  caused  an  author  to  make  the 
ironical  rhyme : 

"To  steal  for  pence  is  paltry  and  mean, 
To  rob  for  millions  with  a  soul  serene 
Soils  not  the  hands:  all  success  is  clean." 

Now  gentlemen,  I  want  you  to  observe, 
that  the  advocates  of  legislation  against 
aggregated  capital,  have  not,  even  at  this 
late  day — years  after  the  agitation  has  been 


Limitation  of  Capital  19 

commenced — put  their  views  into  definite 
form;  and  there  is  the  difficulty  in  discuss- 
ing the  question.  Let  me  try  to  give  to 
their  vague  theories  a  "local  habitation  and 
a  name."  Let  me  strive  to  make  a  postu- 
late, for  the  people  who  oppose  aggregated 
capital,  that  will  form  a  basis  of  discussion 
— historic,  moral,  legal  or  religious,  if  you 
please.     Let  me  create  an  issue. 

Aggregated  capital  is  wrong,  is  pernicious, 
is  fraught  with  danger!  What  is  meant  by 
that?     There  are  three  things  that  should 

must  be  looked  into  in  approach-  cfpTtarEm- 
ing  this  question;   namely,  (i)  the  p'°yedin  any 

°  ^  y  '    \    /  Business  be 

amount  of  capital  intended,  (2)  Limited? 
the  person  in  whose  hands  the  capital  is 
vested,  and  (3)  the  use  to  which  the  capital 
may  be  put. 

Now,  let  us  follow  this  arrangement  and 
see  whether  there  is  any  intelligent  basis 
made  by  these  advocates,  and  I  will  put 
them  all  in  one  class — newspapers,  political 
organizations,  writers  and  everybody  else ;  is 
there  any  intelligent  or  sufficient  information 


20  Commercial  Trusts 

vouchsafed,  which  covers  these  three  im- 
portant points? 

First,  the  amount  of  the  capital ;  second, 
the  person  who  is  to  use  the  same ;  and  third, 
the  use  to  which  the  capital  is  to  be  put. 

Now,  let  us  see,  as  to  the  amount  of  the 
capital.  How  much  capital  is  pernicious? 
Is  a  million  dollars  capital,  aggregated  into 
the  hands  of  a  corporation,  pernicious;  or 
is  two  millions ;  or  is  five  millions ;  or  is  ten 
millions ;  or  is  fifty  millions ;  or  is  a  hundred 
millions  ? 

You  cannot  discuss  questions  of  proposed 
legislation  unless  you  have  fixed  principles, 
and  information,  to  go  by.  You,  sitting 
here  as  intelligent  inquirers  into  the  truth, 
going  to  the  bottom  of  things,  must  have 
facts.  You  cannot  predicate  legislation  upon 
doubt  and  uncertainty.  You  must  be  able 
to  know  and  say  how  much  aggregated  capi- 
tal is  pernicious;  whether  it  is  a  million 
dollars,  or  five  million  dollars,  or  twenty 
millions,  or  fifty  millions,  or  a  hundred  mil- 
lions.    Which  amount  is  it? 


Limitation  of  Capital  2 1 

Those  who  oppose  aggregated  capital  have 
never  yet,  so  far  as  my  observations  are  con- 
cerned, or  so  far  as  my  research  has  gone, 
answered  that  question  intelHgently,  or  an- 
swered it  at  all.  In  fact,  that  is  a  problem 
which  this  body  is  left  to  solve  upon  mere 
hypothesis. 

Then  the  second  one ;  the  person  in  whom 
the  capital  is  vested.  Are  one  hundred  mil- 
lions of  dollars  more  pernicious  in  can  Amount 
the  hands  of  a  corporation  than  in  controlled  by 

^  Corporations 

the  hands  of  a  partnership;  are  be  Limited? 
fifty  millions  of  dollars  more  pernicious  in 
the  hands  of  a  partnership  than  in  the  hands 
of  an  individual?  Will  the  opponents  of 
aggregated  capital  make  answer  to  these 
questions  to  this  Commission  ? 

Are  you  prepared  to  say,  gentlemen,  that 
you  will  allow  an  individual  in  this  com- 
munity to  have  a  hundred  million  dollars,  but 
will  deny  the  same  right  to  a  corporation? 
Now,  let  us  see  where  that  will  lead  you  to. 
Let  us  follow  this  question  down  to  a  legiti- 
mate business  result,  and  that  is  all  I  ask. 


22  Commercial  Trusts 

Do  not  let  us  wander  into  the  realm  of  specu- 
lative discussion ;  because  1  am  here  to  meet 
serious  objections,  not  flimsy  hypotheses. 
Are  you  prepared  to  say  that  you  will  give 
an  individual  the  right  to  hold  one  hundred 
million  dollars,  and  that  you  will  deny  the 
same  privilege  to  a  corporation?  Now,  let 
us  see  where  such  a  conclusion  would  lead 
to. 

The  capital  of  a  corporation  is  divided  into 
many  parts — shares  and  bonds,  or  one  or 
both.  The  corporation  capital  is  not  gener- 
ally owned  by  one  person ;  it  is  usually  owned 
1  by  many  persons;  there  are  frequently  as 
many  as  ten  thousand  shareholders  in  one  cor- 
poration— ten  thousand  shareholders  or  bond- 
holders of  small  capital  and  small  means, 
who  put  their  money  into  an  organized  con- 
cern for  the  purpose  of  reaping  a  reasonable 
rate  of  interest  through  the  instrumentality 
of  dividends,  and  in  a  belief  that  the  aggre- 
gation might  result  in  something  profitable. 
Now,  suppose  you  deny  ten  thousand  people 
the  right  to  participate  in  aggregated  capital, 


Restriction  of  Capital  23 

and  you  afford  that  right  to  one  individual, 
who  can  congregate  in  his  hands  that  vast 
and  enormous  sum  of  money.  Would  that 
be  just  or  logical?  I  am  giving  no  expression 
of  my  own  humble  opinion  about  these  ques- 
tions; I  am  simply  opening  up  this  subject, 
and  showing  you  how  difficult  your  mission 
is:  to  propose  laws  in  the  absence  of  such 
vital  knowledge. 

Very  well;  now,  let  us  go  another  step, 
third;  what  is  the  use  to  which  the  money 
can  be  put?  Is  it  pernicious  that  should  the 
a  hundred  million  dollars  should  cajitafbl 
be  invested  in  railroads?  Is  it  R^tricted? 
pernicious  that  a  hundred  million  dollars 
should  be  invested  in  transportation,  canal 
companies,  insurance  companies,  banks  and 
real  estate;  is  that  what  the  opponents  of 
capital  claim  ?  We  have  no  light  on  this  ques- 
tion. Has  anybody  been  so  bold  as  to  ap- 
pear before  this  honorable  Commission  to 
advocate  laws  which  were  calculated,  as  they 
say,  to  choke  to  death  this  modem  monster, 
called  "aggregated  capital,"  without  giving 


24  Commercial  Trusts 

some  information  upon  this  point  ?  Has  any- 
body come  before  this  Commission  and  given 
it  data  which  will  enable  a  reasonable  mind 
to  come  to  an  honest  conclusion  in  respect  to 
the  use  to  which  capital  should  be  limited? 
Will  you  say  that  a  corporation  cannot  put 
a  hundred  million  dollars  in  the  organization 
of  a  manufacturing  business;  will  you  say 
that  it  shall  not  put  a  hundred  million  dollars 
in  real  estate ;  will  you  say  that  a  corporation 
formed  in  New  York,  with  a  hundred  million 
dollars,  for  the  purpose  of  irrigating  lands  in 
Texas,  or  in  Arizona,  is  illegal,  and  at  the 
same  time  allow  a  hundred  million  dollars, 
to  go  into  the  banking  business,  or  into  the 
insurance  business?  Where  is  the  line  of 
demarcation  to  be  drawn;  where  will  you 
begin  with  the  chalk,  as  Mr.  Burke  says,  arfd 
mark  the  boundary  that  separates  the  per- 
nicious from  the  commendable,  or  proper, 
employment  of  capital? 

These  vital  points  are  not  answered,  so  far 
as  I  have  been  able  to  learn,  and  they  must 
be  answered  before  you  can  make  any  intelli- 


Restriction  of  Capital  25 

gent  law;  and  the  reason — and  I  shall  ap- 
proach that  hereafter — why  the  repressive 
laws  against  aggregated  capital  have  not  been 
executed  is  that  they  never  were  comprehen- 
sibly studied  by  the  legislators,  and  the  sub- 
jects never  properly  discussed  or  understood ; 
but  the  legislators  madly  dashed  to  the 
work,  threw  ink  upon  paper  and  called 
it  legislation,  and  they  ask  the  Courts  to  en- 
force it — enforce  a  statute  based  upon  doubt, 
and  guess,  and  speculation,  and  against  the 
natural  laws  of  trade  and  business. 

Now,  let  me  again  try  to  formulate  some 
postulate  for  these  opponents  of  capital. 
They  say  that  aggregated  capital,  held  by  a 
corporation,  for  the  purpose  of  manufactur- 
ing, or  business,  or  commerce,  is  pernicious 
and  detrimental  to  public  interests.  I  can- 
not undertake  to  give  the  language  which  has 
been  used  by  some  of  the  orators  in  portray- 
ing the  dreadful  future  which  is  in  store  for 
this  country  if  aggregated  capital  is  permitted 
to  exist.  But  adopting  the  proposition  most 
frequently  used  that  "aggregated  capital  in 


26  Commercial  Trusts 

the  hands  of  corporations  is  detrimental  to 
the  interests  of  society,"  I  ask  on  what 
grounds  ? 

It  is  said  that  aggregated  capital  is  per- 
nicious, because  it  creates  a  monopoly,  and, 
DoesAggre-  thcrcforc,  wc  must  advance  one 
Irlate^a  ^"^^  stcp  furthcr  in  the  discussion  and 
Monopoly?  ^^.y  ^q  discovcr  what  a  monopoly 
is.  Definitions,  as  before  mentioned,  are  the 
essentials  that  you  gentlemen  want  and  must 
demand ;  they  are  like  the  guides  on  a  peril- 
ous road  at  night,  when  you  see  the  white 
stones  marking  the  route  to  enable  you  to 
safely  pilot  your  way.  But  if  you  allow 
yourselves  to  drift  about  in  a  sea  of  specu- 
lation, without  any  compass  or  chart,  without 
any  definite  notion  of  where  you  are  going, 
you  will  most  likely  land  upon  the  rocks  and 
be  shipwrecked.  Therefore,  arguing  this 
matter  as  a  lawyer,  I  look  upon  definitions 
as  of  vital  primary  importance. 

Now,  the  word  ''monopoly"  has  a  legal,  it 
has  a  grammatical,  and  it  has  a  historical 
meaning.     The  legal  and  grammatical  mean- 


Aggregated  Capital  27 

ing  of  the  word  "  monopoly"  is  the  same.  A 
monopoly,  according  to  the  dictionary,  is 
the  exclusive  privilege  of  traffic—  definition  of 
"the  exclusive  possession  of  any- " ^°"°p°^y-" 
thing  as  a  commodity  or  a  market."  It  is 
an  exclusive  privilege,  resting  in  the  hands 
of  one  person  or  corporation,  to  the  exclusion 
of  everybody  else,  and  to  comprehend  a 
monopoly  you  must  realize  that  there  can 
exist  no  monopoly,  unless  it  is  exclusive. 
That  is  the  whole  basis  of  it.  This  word 
monopoly  received  a  significance,  and  a  great 
emphasis,  in  the  time  of  Elizabeth.  She  gave 
out,  as  Hume  will  tell  you — and  I  am  not 
going  into  that  part  of  history,  except  to  re- 
fer to  it,  so  that  if  anybody  wishes  to  pursue 
the  subject  he  can  do  so — Hume  tells  us  that 
Queen  Elizabeth  gave  out  these  exclusive 
monopolies  to  various  courtiers,  in  return 
for  favors,  or  for  services,  often  otherwise 
unrewarded.  The  Queen  paid  in  that  way 
instead  of  with  money.  She  did  not  incor- 
porate commercial  companies;  they  were 
not  heard  of,  not  thought  of,  not  dreamed  of 


28  Commercial  Trusts 

in  her  time;  but  she  took  John  Smith  or 
John  Jones,  as  the  case  might  be,  and  she 
said,  "Hereafter,  you  are  to  have  the  exclu- 
sive privilege  of  manufacturing  or  selling  to- 
bacco in  the  Kingdom  of  England,  and 
nobody  else  can  do  it";  and  every  diction- 
ary will  tell  you  that  such  a  transaction  illus- 
trates the  meaning  of  monopoly. 

We  lawyers,  brought  up  on  the  milk  of 
Blackstone,  absorbed  a  prejudice  against  mo- 
nopolies, to  such  an  extent,  that  when  you 
mention  monopoly  to  a  lawyer,  it  is  precisely 
like  waving  a  red  flag  before  a  bull.  It  is  a 
fundamental  basis  of  a  lawyer's  education  to 
oppose  monopolies.  But  there  have  existed 
in  this  Republic,  with  but  few  exceptions,  to 
which  I  shall  refer,  no  monopolies  since  its 
organization,  and  therefore  the  use  of  the 
word  monopoly,  in  the  legal  and  in  the  gram 
matical  sense,  must  be  discarded  from  this 
discussion ;  it  has  no  business  here ;  it  has  no 
technical  or  practical  meaning  when  applied 
to  aggregated  capital. 

But  there  are  two  monopolies  which  may 


Aggregated  Capital  29 

still  exist.  There  is  a  monopoly  in  patents. 
The  people  of  the  United  States  have  seen 
fit  to  say  that  when  a  man  invents  a  process, 
which  goes  through  the  ordeal  of  the  Patent 
Office,  and  is  regarded  as  being  a  practical 
invention,  Congress  can  give  him  the  privi- 
lege, for  seventeen  years,  of  using  it,  for  his 
own  sole  and  exclusive  benefit. 

In  all  their  furious  denunciations,  in  all  the 
extreme  criticisms  to  which  the  opponents  of 
aggregated  capital  have  gone,  I  have  not  seen 
any  suggestion  that  we  should  repeal  the 
patent  laws.  So,  that  if  some  one  were  to 
discover  a  process,  by  which  he  could  make 
a  loaf  of  bread  out  of  a  stone,  for  one  cent, 
and  every  baker  and  miller  in  the  world 
would  be  ruined  thereby,  there  is  not  one 
voice,  which  could  effectually  be  raised 
against  the  granting  of  such  a  patent.  And 
yet  the  patentee  would,  Jove-like,  armed  with 
the  thunder  of  his  patent,  have  in  his  hancjs, 
all  that  tremendous  power,  directly  from  the 
Government  of  the  United  States  itself,  and 
before  which  power,  the  monopolies  granted 


30  Commercial  Trusts 

by  Queen  Elizabeth,  to  her  favorite  cour- 
tiers, would  sink  into  absolute  insignificance. 

That  is  one  kind  of  monopoly  that  exists ; 
and  in  your  deliberations,  gentlemen,  you 
must  very  carefully  weigh  this  question ;  as 
to  how  far,  you  can  restrict  the  use  of  capital 
in  the  aggregated  form,  on  the  one  side; 
and,  at  the  same  time  allow  these  extraor- 
dinary patents,  becoming  more  and  more 
extensive,  as  science  advances,  to  be  issued 
by  the  government,  on  the  other. 

There  is  still  another  species  of  monopoly, 
and  that  is  a  monopoly  in  the  form  of  a  spe- 
cial charter  granted  by  a  legislature,  or  by 
the  national  government.  Here  is  a  monop- 
oly in  a  certain  sense.  But  it  is  of  no  great 
importance  in  this  discussion,  because,  by 
force  of  constitutional  provisions,  every  spe- 
cial charter  which  has  been  granted  within 
the  last — I  should  say  twenty-five  or  thirty 
years — I  do  not  want  to  be  put  down  as  if 
I  were  actually  accurate,  but  within  the 
last  twenty-five  or  thirty  years — I  think 
every  State  Constitution  has  given  the  legis- 


Aggregated  Capital  3^ 

lature  absolute  authority,  to  peremptorily 
revoke  charters,  so  that  no  great  detriment 
can  occur  to  the  community,  through  their 
instrumentality.  And,  as  a  matter  of  fact, 
almost  every  State,  if  not  all,  has  laws  which 
enable  individuals  to  become  incorporated 
companies,  through  its  general  laws;  and  it 
is  unnecessary  to  apply  to  the  legislatures 
for  special  charters,  except  in  extraordinary 
cases,  and  only  when  special  circumstances 
seem  to  disclose  a  peculiar  merit  in  the  enter- 
prise. So,  there  is  nothing  to  call  for  special 
remark  about  special  charters. 

We  come,  therefore,  to  the  consideration 
of  another  kind  of  monopoly — one  growing 
out  of  existing  conditions,  and  the  meaning 
of  which  one  cannot  find  in  his  dictionary ; 
and  we  must  discard  legal,  grammatical  and 
historical  monopolies  from  this  part  of  the 
discussion.  Driven  out  of  the  position  that 
aggregated  capital  is  a  technical  monopoly, 
its  opponents  have  assumed  to  create  another 
and  a  new  one,  and  there  has  been  created, 
what  I  shall  call  a  resulting  monopoly,   a 


32  Commercial  Trusts 

monopoly  in  fact,  and  that  I  would  define  to 
be  this:  that  while  aggregated  capital,  or 
individual  wealth,  or  partnership  wealth,  has 
not  sought  through  the  instrumentality  of  a 
license,  or  a  special  prerogative,  from  the 
government,  to  exercise  certain  privileges, 
to  the  exclusion  of  all  other  people,  yet  the 
influence  of  concentrated  wealth  is  so  great, 
that  it  amounts  to  a  virtual  monopoly.  This 
is  a  monopoly  in  fact  :  a  monopoly  which 
results  from  the  condition  of  existing  things. 
Now,  that  is  the  monopoly  with  which  we 
have  to  deal,  and  which  you  have  to  discuss, 
and  about  which  you  have  to  undertake  to 
legislate.  That  is  a  monopoly  in  fact,  a  new 
monopoly,  not  alluded  to  by  any  legal  writ- 
ers, so  far  as  I  remember,  or  so  far  as  I  have 
been  able  to  find,  but  a  new  meaning  to  the 
word  "monopoly"  which  has  grown  out  of 
the  modem  aggregation  of  capital,  and  it  is 
claimed,  that  if  the  aggregation  of  corporate 
capital  is  accomplishing  the  same  thing 
as  a  technical  monopoly,  it  ought  to  be 
suppressed. 


History  of  Capital  33 

This  brings  me  to  another  proppsition, 
which  is  this :  that  the  necessities  for  the  use 
of  large  sums  of  money — of  combined  capi- 
tal are  the  natural  result  of  commercial  and 
financial  conditions;  not  only  the  natural 
but  the  necessary  result  of  existing  condi- 
tions. I  claim,  that  aggregated  capital  is 
the  necessary  and  natural  handmaid  of  ad- 
vancing commerce;  and  that  without  it  we 
could  never  have  attained  our  present  colos- 
sal industrial  development. 

Now,  I  shall  endeavor  to  prove  my  propo- 
sition in  this  way :  I  am  going  to  History  of 
show  you  the  history  of  capital;  Growth  of 
and  the  Jorms  which  it  has  from  capital, 
time  to  time  assumed  to  meet  enlarged  and 
advancing  commercial  conditions. 

I  shall  not  talk  at  random.     I  shall  refer 

to  actual  facts,  and  speak  by  the  card  of 

history.     If  history  is  wrong;    if  we  cannot 

consult  it  with  any  degree  of  safety,  then 

all  of  my  argument  must  fall  to  the  ground, 

and  the  fabric,  which  I  am  endeavoring  to 

raise  here,  must  crumble  into  dust. 
3 


34  Commercial  Trusts 

The  question  of  partnership  is  the  one 
which  I  will  first  discuss.  The  communion 
Partnerships,  of  goods  among  two  or  three  or  more 
men  can  be  found  clearly  and  satisfactorily 
in  the  ancient  world.  You  will  find  that  in 
ancient  Greece  among  that  people  there  ex- 
isted what  was  called  a  communion  of  goods. 
Two  or  more  men  figured,  that  their  indi- 
vidual efforts  would  be  made  more  satisfac- 
tory, by  a  combination — putting  their  goods 
together,  and  they  formed  what  was  called 
the  communion  of  goods ;  that  is  the  equiv- 
alent of  the  Greek  word  in  English,  *' com- 
munion." Partnerships  existed,  and  held 
their  way  down,  through  the  various  grada- 
tions of  history  and  society,  until  we  reach 
our  English  history;  from  whence  we  draw 
all  that  is  of  great  importance  in  our  laws 
and  our  customs,  and  institutions,  and  in 
fact  almost  everything  else  of  value,  in  our 
national  life.  These  partnerships  answered 
their  purpose,  as  long  as  they  were  found  to 
be  fit  and  proper  instrumentalities;  and 
when  they  did  not,  why,  something  else  was 


History  of  Capital  35 

discovered.  A  partnership  was  all  very- 
well,  so  long  as  it  could  furnish  means  for 
advancing  mercantile  and  commercial  affairs ; 
but  you  can  see  at  once,  when  I  explain  the 
disadvantages  of  partnerships,  that  when 
we  began  to  develop  and  unfold  this  colossal 
country  (and  this  development  is  alone  an- 
swerable for  all  the  alleged  sins  of  aggregated 
capital),  when  we  entered  upon  very  large 
business  affairs,  partnerships  would  not 
answer. 

There  were  three  distinct  characteristics 
in  every  general  partnership.  In  the  first 
place,  each  partner  was  liable  for  the  debts ; 
that  fact  circumscribed  its  operations  and 
utility.  John  Jones  and  John  Smith  en- 
tered into  a  partnership,  and  John  Smith  was 
answerable,  for  all  the  debts ;  so  that  John 
Smith  might  have  put  a  hundred  thousand 
dollars  into  the  partnership,  and  John  Jones 
would  bring  the  firm  in  debt  to  the  amount 
of  five  hundred  thousand  dollars,  and  John 
Smith  was  liable;  that  was  one  of  the  dis- 
advantages of  partnership. 


3^  Commercial  Trusts 

Another  disadvantage  was  this:  that 
when  one  of  the  partners  died,  the  business 
was  at  an  end.  Death  dissolved  the  part- 
nership, just  as  it  does  marriage,  and  al- 
though the  firm  might  have  been  in  the 
midst  of  a  flourishing  business,  the  death  of 
one  of  the  partners  immediately  cancelled 
it,  stopped  it  and  prostrated  the  business. 

Of  course,  I  remember  that  lawyers  have 
undertaken  to  provide  for  the  continuation 
of  a  partnership  after  the  death  of  one  or 
more  of  the  partners,  but  about  this  attempt 
at  continuation,  the  average  man  argues  in 
this  wise:  ''Well,  I  don't  want  to  continue 
it  after  my  death ;  I  shall  have  a  widow  and 
children"  and  all  that;  and  there  were  in- 
numerable difficulties,  that  you  gentlemen 
understand  yourselves  from  practical  ex- 
perience. When  you  undertook  to  grapple 
with  the  problems  which  an  advancing 
American  commerce  opened,  with  the  lim- 
ited means  and  many  disadvantages  of  part- 
nership, that  form  would  not  answer  at  all. 

Then  there  was  another  element  against 


History  of  Capital  37 

the  partnership ;  and  that  is  that  you  could 
not  bring  a  suit  against  the  partnership  with- 
out suing  all  of  the  parties ;  which  was  very- 
disadvantageous ;  you  could  not  sue  one 
partner  only  for  a  partnership  debt.  It  was 
necessary  to  join  them  all,  and  serve  them 
all,  if  you  wanted  an  individual  judgment. 
These  disadvantages,  and  the  increasing  de- 
mands of  commerce  required  us  to  advance 
a  step  further  and  find  other  and  broader 
and  greater  means  for  transacting  business. 

In  Pennsylvania,  I  think,  the  first  step 
was  taken  towards  the  introduction  of  a  new 
and  expanded  system  of  capital,  Limited 
and  it  was  called  a  "limited  part-  ^"^""^hip. 
nership."  These  partnerships  were  origi- 
nally drawn  from  the  customs  and  laws  of 
Italy,  and  then  transplanted  into  France, 
where  they  were  known  under  the  name  of 
en  Commandite,  and  they  were  subsequently 
introduced  into  the  United  States. 

Let  me  explain  what  a  limited  partnership 
was.  I  do  not  mean  that  you  do  not  know; 
but  I  want  to  explain  it  as  a  part  of  this 


38  Commercial  Trusts 

discussion.  A  limited  partnership  was  a 
method,  by  which  a  man  entering  into  a 
commercial,  or  manufacturing  business,  could 
limit  his  liability.  If  two  individuals  wished 
to  enter  into  a  partnership,  and  one  did  not 
want  to  engage  in  active  business,  he  could 
advance,  say,  $100,000  to  his  associate,  who 
was  the  general  partner,  and  escape  a  liabil- 
ity, by  filing  a  certificate  in  the  proper  clerk's 
office,  that  he  was  a  special  partner,  and 
making  a  publication  in  the  newspapers,  and 
having  it  put  on  the  sign,  that  he  was  a  special 
partner.  The  result  of  which  was,  that  he 
was  enabled  to  engage  in  a  business  without 
individual  liability,  beyond  the  sum  that  he 
advanced  in  the  inception  of  the  enterprise, 
and  the  whole  responsibility  was  thrown  on 
the  general  partner. 

Now,  in  France,  and  in  Pennsylvania  also, 
to  a  certain  extent,  I  believe,  they  allowed 
shares — certificates  of  stock — to  be  issued 
against  the  interest  of  the  partners,  so  that 
this  partnership  became  a  gwa^z -corporation. 
The  limited  partnership  only  existed  for  the 


Commercial  Corporations       39 

time  mentioned  in  the  articles  of  copartner- 
ship ;  but  the  interest  of  each  partner  might  be 
segregated  into  shares  and  negotiated  in  the 
form  of  certificates  of  stock.  They  allowed 
them  to  be  issued,  very  largely,  in  France, 
and  there  were  some  very  extensive  litiga- 
tions there,  which  you  will  find  recorded  in 
Troubat  {Law  of  Limited  Partnership),  if  you 
have  a  desire  to  investigate  the  subject.  Yet, 
you  can  see,  that  the  system  of  limited  co- 
partnership, furnished  but  a  very  meagre 
contribution  to  the  advancing  wants  of 
commerce. 

The  ingenuity  of  the  age  was  great  enough 
for  the  occasion,  and  out  of  those  necessities 
there  came  the  commercial  corpor-  commercial 
ation.  The  commercial  corpora- ^°''p°"''°"'- 
tion,  as  it  exists  to-day,  was  never  developed 
in  any  substantial  form,  in  this  country, 
previous  to  the  year  1850. 

You  will  find  that  the  first  book  on  cor- 
porations was  published  in  1793  by  Kyd. 
But  it  was  altogether  limited  to  questions  of 
mimicipal  corporations ;  and  if  you  take  the 


40  Commercial  Trusts 

books  of  Watkins  and  Grant  on  corporations, 
and  all  the  other  literature  on  corporations, 
you  will  find  that  up  to,  and  even  in,  the  first 
American  book  of  Angel  &  Ames,  which  was 
published  in  1831,  there  is  hardly  an  allusion 
to  our  commercial  corporations;  and  it  was 
not  until  after  1850,  when  commercial  cor- 
porations came  in  vogue,  that  one  discovers 
any  legal  literature  upon  this  subject.  The 
first  general  corporation  act,  in  the  State  of 
New  York,  was  passed  in  1848 ;  it  was  known 
as  the  Manufacturing  Act. 

When  the  railroad  system  of  the  country 
was  introduced  and  began  to  be  used,  we 
discover  that  the  commercial  and  manufac- 
turing corporations  gradually  came  into 
vogue,  the  one  following  closely  in  the  wake 
of  the  other;  and  through  the  instrumen- 
tality of  general  laws,  three  or  four,  or  ten  or 
twelve,  or  any  number  of  persons  beyond 
three,  might  get  together,  and  file  a  certifi- 
cate, and  become  a  corporation.  The  tend- 
ency of  legislation  was  at  first  to  narrow  the 
limits  of  a  corporation ;  that  is,  in  the  amount 


Commercial  Corporations       41 

of  capital  which  it  was  allowed  to  have ;  and 
you  will  find,  if  you  consult  the  law,  that  in 
almost  every  instance  previous  to  1 861,  when 
the  war  broke  out,  the  several  States  placed 
limitations  upon  the  amount  of  corporate  cap- 
ital. That  restriction  gradually  disappeared, 
until  to-day,  in  most  of  the  States,  in  almost 
all  of  what  we  call  the  commercial  States, 
there  is  an  unlimited  amount  of  capital 
allowed ;  so  that  several  individuals  may  now 
get  together,  and  form  a  corporation,  and  do 
business,  with  an  unlimited  capital. 

Now,  one  of  the  most  important  elements 
in  the  discussion  of  this  question  of  aggre- 
gated capital,  is  to  understand  what    Nature  and 

Functions  of 

a  corporation  is,  and,  therefore,  I  corporations, 
come  to  another  definition.  I  will  take 
Blackstone's:  "A  corporation  is  an  artificial 
person  created  for  preserving  in  perpetual 
succession  certain  rights,  which,  being  con- 
ferred on  natural  persons  only,  would  fail  in 
the  process  of  time." 

Let  us  see  what  the  essence  of  a  corporation 
is,  and  how  capital  and  business  shifted  from 


42  Commercial  Trusts 

a  general  partnership  at  first,  into  a  limited 
partnership,  and  from  a  limited  partnership 
into  a  corporation.  Take  the  legal  history 
of  partnerships,  limited  partnerships  and  cor- 
porations, on  the  one  side;  take  the  history 
of  commercial  expansion ;  take  the  history  of 
territorial  expansion;  take  the  history  of 
railroad  expansion,  on  the  other,  and  you  will 
see  what  necessary  aids  they  were  to  each 
other,  and  how,  as  railroads  and  commerce 
expanded ;  how,  as  new  territories  and  fields 
were  opened,  our  manufacturing  industries 
increased  and  enlarged,  and  how  capital,  like 
an  apt  and  willing  handmaid,  kept  apace  with 
all ;  how,  in  the  colossal  development  of  this 
country,  capital,  both  in  substance  and  form, 
was  always  ready  to  supply  the  vital  means, 
to  feed  the  modern  Titan  of  business  in  its 
most  stalwart  growth. 

A  corporation  has  certain  functions  impos- 
sible to  be  exercised  by  individuals  or  partner- 
ships. 

First,  it  has  perpetual  succession.  That  is, 
its  existence  is  unbroken  and  uninterrupted, 


Commercial  Corporations       43 

down  to  the  time  when  it  is  to  expire  by 
limitation.  You  can  now  incorporate  a  com- 
pany for  a  thousand  years,  if  you  wish,  or 
fifty,  which  is  the  period  generally  followed. 
A  corporation  may  consist  of  a  thousand  in- 
dividuals; many  of  them  have  more  than 
that  number;  to-day  the  New  York  Central, 
and  the  Pennsylvania  railroads  have  many 
thousand  stockholders.  They  die;  their 
descendants  die,  but  the  corporation  is  un- 
dying. It  goes  on  forever.  This  result  a 
copartnership  could  not  accomplish ;  neither 
a  general  nor  a  limited  one. 

What  is  the  second?  The  second  quality  of 
a  corporation  is,  that  a  stockholder  is  not 
liable  for  the  debts  of  the  corporation.  This 
was,  therefore,  as  one  can  see,  the  most  at- 
tractive form  of  carrying  on  business.  It  en- 
ables several  individuals  to  go  into  a  business, 
and  to  put  in  five  or  ten  or  fifteen,  one  hun- 
dred thousand  dollars,  or  any  other  sum,  and 
each  knows  the  limit  of  his  liability.  This 
was  the  feature  that  appealed  to  business 
men.     They  knew,  that  when  they  went  into 


44  Commercial  Trusts 

a  corporate  enterprise,  their  responsibilities 
were  limited  and  fixed,  which  could  not  be 
the  result  in  a  partnership  where  the  liability 
was  unlimited. 

Another  feature  of  corporations  which  was 
of  the  highest  importance,  was  the  trans- 
mutability  of  the  stockholders'  interests,  the 
power  of  disposing  of  their  stock  in  the  cor- 
poration. They  could  sell  or  transfer  their 
interests  in  the  corporation  to  others.  Every 
contributor  to  the  capital  stock  of  a  corpora- 
tion receives  a  certificate  of  stock ;  that  certif- 
icate of  stock  he  can  put  in  his  drawer  or  safe ; 
it  is  personal  property,  and  he  can  sell  it  in 
the  markets  or  give  it  to  his  children.  It  is 
always  there  in  a  tangible,  neat  and  easy 
form,  for  him  to  use ;  it  is  a  certificate  that 
he  has  an  interest  in  the  corporation  and  that 
his  liability  was  fixed  by  that  certificate  of 
stock.  This  could  not  be  done  in  a  copart- 
nership. A  sale  could  not  be  made  of  his 
interest  in  such  a  business,  because  it  was 
based  upon  personal  and  peculiar  reasons. 
In  the  development  of  large  enterprises,  cer- 


Commercial  Corporations       45 

tainly  nothing  could  be  happier,  than  the 
conception  of  a  corporation ;  certainly,  noth- 
ing could  be  better.  The  men  who  originally 
went  into  them,  who  were  the  pioneers,  in  the 
formation  of  our  commercial  and  our  manu- 
facturing corporations,  and  our  railroad  cor- 
porations, and  our  insurance  corporations, 
who  have  all  long  since  passed  away,  were 
shrewd,  bright  and  skilful  merchants.  In 
adopting  this  system  of  business,  men  were 
enabled  to  sleep  peaceably;  it  enabled  each 
man  to  limit  his  liability ;  it  enabled  him  to 
have  his  certificate  of  ownership  in  his  pocket, 
and  enabled  the  corporation  itself,  which  was 
an  entity,  a  legal  entity,  to  carry  on  a  great 
enterprise,  without  any  regard  to  who  the 
stockholders  were,  or  whether  they  were  dead 
or  alive,  except  as  they  contributed  to  its 
success  by  choosing  proper  boards  of  direc- 
tors and  officers  to  manage  its  concerns. 

Now,  in  regard  to  the  capitalization.  The 
originators  raised  the  capital,  by  issuing 
shares  of  stock  and  bonds.  The  money 
needed  for  their  business  was  raised  by  selling 


ly 


46        '     Commercial  Trusts 

the  stock  to  whomsoever  would  buy  it — a 
few  or  many. 

In  this  connection,  I  have  to  speak  about 
a  subject  of  the  utmost  importance  in  this 
The  Method   discussiou  and  in  its  effect  upon 

of  Raising 

Capital  by      your  opinions  and  labors — some- 
corporation      1  .  1         T 
Bonds  and     thmg  that  I  regard  as  one  of  the 

Explained,  grcatcst  and  cleverest  devices  ever 
created  by  man  to  collect,  aggregate  and  dis- 
tribute capital.  I  allude  to  corporation 
mortgages,  by  which  thousands  of  persons 
poured  their  money  contributions,  small  or 
large,  through  various  channels,  into  the 
common  treasury  of  the  company;  all  the 
vast  capital  necessary  to  run  these  great 
enterprises  being  contributed  through  the 
sale  of  mortgage  bonds  until  the  full  capital 
demanded  by  a  particular  business  project 
was  supplied. 

If  you  will  reflect  upon  the  subject,  it  be- 
comes plain  that  there  is  no  individual  who 
is  capable  of  loaning  a  very  great  amount  of 
money  on  mortgage  to  a  corporation,  or  in 
a  word,  to  make  one  large  individual  loan. 


Raising  Capital  47 

If  it  were  possible  for  him  to  do  it,  it  would 
not  be  good  policy,  and  the  largest  mortgage, 
I  think,  that  has  ever  been  created,  the  high- 
est individual  mortgage  in  the  United  States, 
was  not  greater  than  four  million  dollars, 
and  that  money  was  loaned  on  real  estate,  I 
think,  in  New  York,  by  one  of  the  large  in- 
surance companies.  A  man  with  four  or 
five  million  dollars,  or  with  twenty  or  thirty 
million  dollars,  does  not  care  to  put  that 
amount  of  money,  as  a  loan,  in  one  place,  on 
one  piece  of  property:  as  they  say,  ''it  is 
putting  too  many  eggs  in  one  basket."  He 
might  loan  to  the  extent  of  a  million ;  prob- 
ably he  would  go  to  two  millions,  but  when 
you  get  up  to  four  or  five  millions,  it  is  too 
great  for  an  individual  loan. 

Large  enterprises  require  immense  sums 
of  money  to  finance  and  run  them.  Twenty, 
thirty  or  fifty  millions  cannot  be  furnished 
by  one  or  two  men.  Such  sums  are  sup- 
plied from  numerous  private  pocket-books 
— from  hundreds  or  thousands  of  contrib- 
utors, as  the  circumstances  demand. 


48  Commercial  Trusts 

Now  see  what  the  ingenuity  of  man  has 
accomplished,  and  an  American,  too;  be- 
cause I  beHeve  that  the  first  railroad 
bonds,  secured  by  mortgage,  emanated  from 
Philadelphia.  It  is  necessary  to  know  what 
a  railroad,  or  corporation,  mortgage  is,  and 
how  it  is  managed.  A  company  makes  a 
mortgage,  say,  for  fifty  million  dollars,  on 
its  property  to  a  trustee  to  secure  many 
bonds  usually  of  the  denomination  of  $1000. 
Who  would,  or  could,  advance  fifty  millions 
of  dollars,  in  one  transaction?  Why,  the 
wealth  of  the  Astors,  the  Vanderbilts,  the 
Rockefellers  and  Pierpont  Morgan,  and  all 
those  men  whose  wealth  has  now  become 
the  subject  of  common  talk,  and  is  spoken 
of  every  day,  as  being  so  colossal ;  even  the 
combined  wealth  of  all  of  these  men  would  be 
but  a  drop  in  the  bucket,  as  it  were,  if  they 
should  undertake  to  carry  out,  without 
other  aid,  the  gigantic  corporation  enter- 
prises developed  in  this  country.  Hence, 
they  create  a  corporation  mortgage,  which 
secures  bonds;  one  mortgage  of,  say,  $100,- 


Raising  Capital  49 

000,000;  you  will  find  plenty  of  them  now; 
and  bonds  are  made,  sold  and  distributed 
all  over,  some  amount  in  your  hands,  another 
amount  in  his,  ten  thousand  dollars  here  and 
ten  thousand  dollars  there,  and  thus  through 
a  thousand  rivulets  or  sources  is  poured  from 
all  sides  into  a  common  treasury,  the  capital 
necessary  to  begin  and  continue  the  opera- 
tions of  the  corporation;  and  through  that 
instrumentality — of  a  railroad  bond,  or  a 
corporation  bond — all  this  colossal  capital 
is  raised,  which  enables  us  to  carry  on  these 
railroad,  industrial  and  commercial  enter- 
prises: using  the  money  of  the  many,  and 
not  of  the  few.  This  is  the  great  modem 
method  of  raising  money  for  private,  or  pub- 
lic purposes.  When  profit  is  made  it  is  di- 
vided among  many ;  and  when  a  loss  occurs 
it  is  so  divided  that  it  falls  heavily  only  upon 
a  few.  Thus  the  money  of  hundreds  of 
thousands  of  individuals  is  used  to  develop 
and  sustain  the  great  industrial,  financial 
and  railroad  enterprises  of  the  country. 
I  do  not  overlook,  of  course,  the  immense 


50  Commercial  Trusts 

sums  of  money  raised  by  the  sale  of  pre- 
ferred and  common  stocks.  Millions  upon 
millions  of  dollars  have  flowed  into  the  treas- 
uries of  different  companies  from  this  source. 
But  it  is  the  speculative  side  of  corporate 
financing.  The  investing  and  more  secure 
side  is  made  through  the  purchase  of  bonds 
secured  by  a  mortgage. 

In  this  connection,  I  wish  to  say  a  few 
words  on  the  subject  of  over-capitalization. 
o^gr.  The  capital  of  a  corporation  is 

capitaiization.^j^g  fund  or  mcans  provided  for 
transacting  the  business  for  which  the  com- 
pany is  organized.  There  are  two  methods 
of  capitalization :  First,  there  is  a  capitaliza- 
tion based  upon  the  actual  value  of  prop- 
erty, and,  second,  a  capitalization  based 
upon  the  earning  power;  these  are  the  two 
bases.  You  will  find  two  classes  of  econo- 
mists or  financiers  in  this  country — one  in 
favor  of  the  former  method,  and  one  in  favor 
of  the  latter.  They  both  have  their  adhe- 
rents. I  confess  that  I  am  in  some  doubt 
about  the  matter,  because  so   many  argu- 


Over-Capitalization  5  ^ 

ments  can  be  made  in  particular  cases  that 
prevent  the  adoption  of  any  uniform  rule; 
and  with  the  experience  that  I  have  had  in 
creating  corporations,  and  in  putting  them 
in  legal  shape,  I  have  no  opinion  defined, 
certain  and  fixed  upon  the  question  as  to 
how  the  capitalization  should  be  based;  be- 
cause each  case  presents  peculiar  circum- 
stances, which  absolutely  make  it  impossible 
to  adopt  an  unvarying  rule.  If  you  capital- 
ize a  property  for  what  it  is  worth,  a  manu- 
facturing business,  or  a  railroad  business, 
you  first  employ  appraisers,  who  will  enable 
you  to  fix  its  value;  assume  that  they  ap- 
praise its  value  at  fifty  million  dollars,  thq 
sum  is  fixed  as  the  capital.  Now,  on  the 
other  hand,  you  have  a  property  that  is 
worth  only  five  million  dollars,  but  by  what 
is  called  its  good-will  or  its  earning  power, 
and  trade-marks,  or  individual  skill,  and  so 
forth,  it  yields  more  net  profits  than  the  prop- 
erty of  fifty  million  dollars.  You,  gentle- 
men, have  seen  that  illustrated  in  your  daily 
business  lives, 


52  Commercial  Trusts 

In  the  one  case  you  have  a  property  worth 
fifty  milHon  dollars,  and  its  yearly  earnings 
are,  say,  only  two  per  cent.,  or  one  million 
of  dollars.  On  the  other  hand  you  have  a 
property  worth  only  five  millions  of  dollars, 
which  earns  twenty  per  cent.,  or  one  million 
of  dollars  per  year. 

Now,  how  shall  these  two  interests  be 
capitalized?  Some  are  disposed  to  fix  an 
arbitrary  principle  or  rule  by  which  capital- 
ization is  to  be  predicated  upon  the  actual 
value,  and  there  is  to  be  no  water.  But,  as 
you  can  see,  that  rule  will  work  manifest  in- 
justice in  many  cases.  Well,  it  is  so  easy 
for  men  to  get  up  and  make  statements  on 
a  political  platform ;  they  are  under  no  obli- 
gations to  anybody,  but  their  consciences; 
and  the  consciences  of  politicians  during 
election  times  are  very  elastic;  they  find  no 
difficulty  in  cutting  themselves  loose  from 
history,  facts  and  experience,  and  they  lay 
down  propositions  which  in  their  responsible 
moments  they  would  shrink  from.  The 
truth  is  that  the  capitalization  of  every  com- 


Over-Capitalization  53 

pany  must  largely  rest  upon  the  peculiar  cir- 
cumstances which  surround  it.  No  fixed 
invariable  rule  can  be  made. 

The  question  of  the  capitalization  of  cor- 
porations is  a  serious  one,  as  it  affects  the 
public  as  well  as  the  individual  stockholders 
or  creditors  of  each  company.  The  success 
of  all  corporations  depends  upon  what  they 
sell  to  the  consumer,  or  what  they  make  from 
the  traveller  or  shipper.  If  a  corporation 
is  grossly  or  unfairly  over-capitalized,  to 
earn  interest  and  dividends  it  must  charge 
proportionately  higher  prices.  These  the 
public  must  pay.  It  accordingly  follows, 
as  a  general  rule,  that  the  lower  the  capital- 
ization the  less  the  tariff  of  charges  the  pub- 
lic must  pay,  because  each  concern  ought  to 
be  satisfied  with  paying  its  shareholders  a 
fair  dividend.  But  a  corporation  may  be 
capitalized  at  a  small  figure  and  pay  enor- 
mous dividends,  when  the  result  to  the  pub- 
lic is  the  same,  whether  the  capitalization 
is  high  or  low,  because  the  same  amount  of 
net  profit  is  made  each  year.     A  corporation 


54  Commercial  Trusts 

which  is  capitalized  at  $100,000,000  can 
pay  25  per  cent,  to  its  stockholders  if  its  net 
yearly  income  is  $25,000,000;  or  it  can  cap- 
italize at  $500,000,000  and  pay  5  per  cent. 
In  the  first  case  its  stock  would  sell  for  $500 
a  share,  and  in  the  second  it  would  sell  for 
$100.  The  result  to  the  public  would  be  the 
same  in  either  case,  and  consequently  the 
question  of  over-capitalization  would  not 
solve  the  problem  in  which  they  are  inter- 
ested, viz. :  in  not  paying  more  than  the  goods 
or  service  were  worth.  Out  of  this  branch  of 
the  subject  will  arise  great  questions  for  fu- 
ture legislators  to  solve ;  first,  can  and  ought 
the  profits  of  these  corporations  to  be  limited  ? 
and  second,  if  yea,  how  can  this  be  legally 
and  fairly  accomplished?  The  law  fixes  the 
rate  of  interest  which  lenders  may  receive. 
It  has  been  asked,  can  the  same  rule  be  ap- 
plied to  corporations  or  aggregated  capital? 
I  warn  you  that  this  is  dangerous  ground  to 
tread  upon.  It  is  full  of  mires  and  quick- 
sands. Yet  there  is  no  problem  which  a 
legislator  cannot  solve,  if  he  enters  upon  the 


Over-Capitalization  55 

inquiry  in  a  proper  spirit:  a  determination 
to  be  just  to  capital  and  fair  to  the  public. 

As  yet  this  field  is  unexplored.  We  have 
nothing,  so  far,  but  ignorant  and  wholesale 
denunciation  of  **  trusts,"  without  any  intelli- 
gent or  honest  effort  on  the  part  of  the  poli- 
ticians to  go  to  the  bottom  of  the  subject  and 
bring  to  the  surface  the  true  underlying 
principles  which  should  govern  us  in  treating 
capital. 

Much  complaint  has  been  made  against 
over-capitalization  of  railroads.  It  is  as  true 
as  gospel  that  many  of  them  are  largely  over- 
capitalized. And  they  can  be  duplicated  for 
less  money.  But  each  railroad  in  this  country 
has  its  own  history.  Some  of  these  railroads 
were  partially  subsidized  by  the  government 
— the  Pacific  roads,  for  example,  but  most  of 
these  vast  trans-continental  lines,  which 
make  it  possible  for  us  to  reach  California  and 
the  Far  West  in  a  very  short  period,  were 
built  by  English  capital;  and  when  I  say 
English  capital,  I  mean  the  financiering  was 
done  through  the  English  houses,  with  their 


5^  Commercial  Trusts 

German  and  other  foreign  connections;  but 
it  was  not  American  capital ;  we  did  not  have 
the  money ;  and  we  could  not  build  the  rail- 
roads. 

Now,  sirs,  as  you  sit  in  judgment  upon 
these  railroads,  you  must  remember  the 
contemporaneous  history  which  surrounded 
them.  Now  that  the  roads  are  built;  now 
that  the  country  is  developed ;  now  that  you 
have  these  flourishing  cities  all  over  the  con- 
tinent growing  larger  every  day,  it  is  very 
easy  to  forget  the  past ;  but  when  you  speak 
of  the  enormous  capital  of  the  railroads,  the 
enormous  capital  of  these  trans-continental 
lines,  remember  how  they  were  built,  and 
tell  me  if  there  was  any  other  method  of 
building  these  roads,  than  the  plan  adopted 
by  the  railroad  builders,  or  contractors  of 
this  country,  situated  as  they  were  at  these 
times?  And  what  was  their  situation?  For 
example,  twenty-five  or  thirty  years  ago,  if  a 
syndicate  proposed  to  build  a  line  from  New 
York  to  Chicago,  or  from  Chicago  to  San 
Francisco,  or  to  New  Orleans,  or  wherever 


Over-Capitalization  5  7 

your  imagination  will  lead  you;  how  were 
they  to  raise  the  money?  Not  from  the  gov- 
ernment. It  was  not  the  policy  of  this  gov- 
ernment to  give  the  money.  The  banks 
would  not  lend  you  the  money :  if  for  no  other 
reason,  at  those  times  they  did  not  have  it. 
It  was  raised  by  private  subscription.  And 
how  could  they  get  the  money?  What  did 
they  do?  They  had  to  go  around  with  an 
engineer's  map,  and  with  the  estimated  earn- 
ings that  were  to  be  produced  from  the 
operations  of  the  road.  And  how  did  they 
approach  capital?  Would  I  come  to  you,  sir, 
as  a  capitalist  and  say,  "Will  you  take  ten 
thousand  of  these  bonds  at  par?" — bonds  on 
an  incompleted  road,  which  you  did  not  know 
would  earn  one  dollar  of  interest  or  not. 
No,  sir.  Put  yourself  in  the  position  of  the 
railroad  contractors  of  this  country  when  you 
are  talking  about  inflated  railroad  capital, 
and  see  how  the  inflation  could  have  been 
avoided.  What  did  they  do?  Why,  they 
offered  a  hundred  shares  of  common  stock  as 
a  bonus,  or  some  other  bonus,  and  they  sold 


58  Commercial  Trusts 

the  bonds  at  fifty,  and  sixty,  and  forty,  or 
whatever  they  could  get  for  them.  And 
there  was  no  other  way  of  doing  the  business. 
And  unless  they  had  sold  the  bonds  your 
country  would  not  have  been  developed. 
And  millions  of  dollars  were  lost  upon  bonds 
which  only  cost  thirty  or  forty  cents  on  the 
dollar,  because  the  development  of  the  coun- 
try was  not  then  fast  enough  to  enable  the 
pioneer  roads  to  earn  their  full  interest.  Of 
course,  times  have  changed,  and  the  marvel- 
lous rapidity  of  our  growth  has  brought  the 
country  at  last  up  to  this  originally  inflated 
capital,  and  roads  which  were  a  few  years  ago 
hopelessly  bankrupt  are  now  earning  full  in- 
terest upon  their  bonds  and  paying  large 
returns  upon  their  stock.  There  is  an  un- 
doubted evil  attendant  upon  all  over- 
capitalization; but  if  the  railroads,  as  their 
volume  of  business  increases,  will  reduce  the 
passenger  and  freight  rates,  the  evil  will  be 
at  least  measurably  overcome.  If  they  do 
not,  it  is  the  duty  of  the  various  legislative 
bodies  to  take  the  matter    into  their  own 


Over-Capitalization  59 

hands  and  fix  rates  and  charges.  But  under 
any  circumstances  we  must  never  forget  the 
part  played  by  our  first  railroads  in  the 
opening  and  development  of  this  marvellous 
republic. 

I  am  not  defending  inflation,  I  am  giving 
you  the  facts,  and  I  am  showing  you  that 
there  was  no  possibility  of  money  being 
raised,  except  through  the  instrumentality  of 
these  large  bonuses.  Well,  many  of  these  rail- 
roads that  were  given  away  almost,  have  now 
reached  a  success,  far  beyond  the  dreams  of 
their  most  sanguine  founders ;  they  have  been 
reorganized,  and  recapitalized  again,  and  are 
paying  handsome  profits  on  each  investment. 
The  development  of  the  country  has  been  so 
phenomenal,  the  business  has  been  so  enor- 
mous, that  people  who  invested  in  these  se- 
curities have  amassed  colossal  fortunes.  If 
you  take  engineers,  and  go  over  the  tracks  of 
the  New  York  Central  and  Pennsylvania  Rail- 
road ;  why,  they  may  tell  you  they  can  build 
the  roads  for  less  money  than  the  sums  at 
which  they  are  capitalized.     Perhaps  this  is 


y 


60  Commercial  Trusts 

true.  But  it  could  not  have  been  done  at  the 
time  the  roads  were  first  built ;  nor  can  a  rail- 
road be  built  to-day  upon  an  actual  hard- 
cash  basis.  You  can  project  a  railroad  line 
from  one  point  of  this  country  to  another,  but 
you  cannot  get  people  to  invest  money  in  it, 
when  it  is  new  and  undeveloped,  unless  there 
are  extraordinary  temptations  to  them.  You 
will  not  put  your  money  into  a  railroad  that 
has  not  been  built,  and  pay  par  for  the  bonds, 
even  if  they  carry  six  per  cent,  interest. 

I  think  the  above  furnishes  some  explana- 
tion of  the  origin,  the  accretion  and  the  de- 
velopment of  capital;  I  have  given  you  an 
outline  of  the  history  of  it  from  its  beginning 
down  to  the  present  time. 

I  come,  then,  to  the  gist  of  the  subject,  and 
that  is  the  question  whether  these  corpora- 
DoAggrega-  tions  for  manufacturing,  commer- 
tirc:reife*^'"  ^^^^  ^^  industrial  purposes  create 
Monopolies  ?  monopolics,  and  if  they  do,  whether 
any  and  what  laws  are  necessary  to  be  made 
to  restrain  or  destroy  them.  I  have  shown 
you  their  development.     And  I  claim,  as  a 


Capital  and  Monopolies        6i 

matter  of  law,  that  they  are  not  technical 
monopolies.  I  maintain  that  unless  you 
license  and  give  exclusive  and  superior  privi- 
leges to  a  corporation  it  is  not  a  monopoly. 
You  may  perhaps  put  your  hand  upon  one 
or  two  corporations — large,  gigantic  corpora- 
tions— in  this  country  that  to-day  are  mo- 
nopolies in  fact.  Have  they  been  given 
exclusive  and  superior  facilities  and  privi- 
leges to  accomplish  that  result  ?  Have  they 
received  privileges  which  are  denied  to  other 
people  ?  Are  they  thriving  upon  any  National 
or  State  law  which  protects  them  as  against 
others  in  the  same  business  class  ?  Are  they 
the  possessors  of  franchises  through  the  in- 
strumentality of  contracts  with  railroad  com- 
panies, which  are  denied  to  others?  If  they 
are,  a  law  which  would  put  everybody  on 
an  equality — and  that  is  what  people  want 
— would  not,  in  my  judgment,  be  wrong.  If 
any  corporation  in  this  country  occupies  a 
superior  position,  stands  on  a  higher  emi- 
nence as  to  privileges  than  any  other  cor- 
poration, or   any  other  body  of  men,  the 


62  Commercial  Trusts 

privileges  which  belong  to  it  should  be  taken 
away.  Corporations,  partnerships  or  indi- 
viduals, as  to  their  business  or  commercial 
or  legal  rights,  must  be  placed  upon  an  abso- 
lute equality.  I  do  not  know  what  has 
transpired  before  this  Commission.  You 
may  have  evidence  in  your  possession  which 
shows  that  discriminations  have  been  made ; 
that  discriminations  exist.  If  they  do,  why, 
I  think  it  is  within  your  province  to  suggest 
some  remedy. 

Now  the  next  question  is,  does  the  present 
condition  of  aggregated  capital  demand  that 
it  should  be  stifled,  or  restricted  or  curtailed 
by  laws.  National  or  State  ? 

I  have  two  or  three  propositions  upon  this 
question  of  monopoly  in  fact  or  resulting 
Should  Aggre-  mouopoly.     They   are    not   mere 

gated  Capital 

be  Regulated  thcorics  of  political  cconomy,  but 
lation?  are  based  upon  facts — because  I 

do  not  intend  to  enter  into  the  sphere  of  politi- 
cal economy  in  this  discussion;  it  is  not 
my  province.  The  province  of  a  lawyer  is  to 
keep  to  the  facts  as  far  as  it  is  possible,  and 


Regulation  of  Capital  63 

that  is  what  I  am  trying  to  do.  A  law  based 
upon  theory  or  hypothesis  can  be  nothing  but 
an  experiment. 

First:  I  claim  that  the  natural  laws  of 
trade  form  a  sufficient  barrier  to  prevent  or 
break  up  most  commercial  monopolies.  That, 
I  say,  is  not  a  proposition  of  political  econ- 
omy ;  it  is  a  proposition  of  fact,  which  I  shall 
prove,  otherwise  it  is  entitled  to  no  weight. 
Every  effort — and  I  know  of  several  within 
my  own  knowledge — that  has  been  made  to 
"comer"  an  article  of  commerce  has  failed. 
You  remember  the  pools  in  wheat  and  com. 
Two  colossal  attempts  to  comer  the  bread- 
stuffs  of  the  world  were  made  in  very  recent 
years;  and  you  know  the  result.  Men  can 
choke  the  arteries  of  commerce  for  the  time 
being,  but  the  natural  stream  of  trade  will 
soon  overflow  their  plans,  and  even  when 
they  think  they  are  in  possession  of  the 
supreme  power,  the  laws  of  trade  are  taking 
it  away  from  them. 

Before  you  undertake,  therefore,  to  legis- 
late against  monopolies,  be  sure  that  you 


64  Commercial  Trusts 

have  defined  what  a  monopoly  is,  and  be 
sure  that  you  do  not  overlook  the  historical 
facts,  which  show  that  every  attempt  ever 
made  to  comer  or  monopolize  breadstuffs 
or  any  other  article  of  commerce,  of  this 
or  any  other  country,  has  failed,  and  reacted 
upon  its  authors,  and  they  have  been  ruined. 
Leave  the  natural  laws  of  trade  alone,  and 
they  will  take  care  of  themselves.  You 
may  be  in  the  hands  of  a  monopolistic  power 
for  a  little  while,  but  the  revulsion  will  come. 
If  you  make  general  laws,  aimed  to  strike  at 
a  single  and  isolated  case,  you  do  more  harm 
to  the  community  than  a  temporary  mo- 
nopoly would,  formed  by  bad  men,  with  the 
evil  design  to  throttle  the  commerce  of  the 
country.     *'  Hard  cases  make  bad  law." 

Second:  There  is  another  principle  to 
which  I  invite  your  attention  in  regard  to 
monopolies — that  whenever  business  is  con- 
ducted in  such  a  way  as  to  cease  to  be 
conservative  it  becomes  a  mark  for  other 
capitalists,  and  the  legislator  can  leave  it 
alone  to  the  outside  world  to  take  care  of. 


Regulation  of  Capital  65 

Do  I  make  myself  plain?  Here  is,  say, 
a  vast  manufacturing  corporation,  with  a 
capital  of  fifty  million  dollars,  and  it  owns 
every  business  of  the  kind  in  which  it  is  en- 
gaged. If  the  managers  undertake,  with  all 
that  power  in  their  hands,  to  depart  from 
conservative  principles — if  they  undertake 
to  raise  prices  to  an  unusual  height,  the  out- 
side capital  which  is  always  watching  an 
opportunity  to  engage  in  lucrative  business 
will  respond.  That  reserve  capital  is  in- 
vited into  the  field,  and  you  have  the  com- 
petition, which  the  opponents  of  aggregated 
capital  regard  as  essential  to  just  business 
conditions.  Take  one — perhaps  the  most 
remarkable  instance  of  this  view — the  so- 
called  "sugar  trust."  It  owned  pretty 
much  everything  when  it  started,  and  what 
was  the  result?  First  one  refinery  and  then 
another  sprang  up,  until  you  find  a  bitter 
and  deadly  fight  and  competition  going  on 
which  must  satisfy  the  bitterest  opponents  of 
aggregated  capital.  Will  not  new  refineries 
spring  up,  and  is  it  not  impossible  to  keep 


66  Commercial  Trusts 

them  from  springing  up?  The  more  that 
are  absorbed,  the  greater  their  capital  is  in- 
flated, and  the  more  powerful  are  the  motives 
to  establish  rival  plants.  Do  you  want  laws 
to  efTect  results  which  nature  brings  about 
so  well?  While  you  are  thinking  of  making 
statutes,  the  natural  laws  of  trade  are  silently 
working  and  pulling  things  to  pieces.  I  am 
constantly  reminded  of  the  compactness  and 
strength  of  the  Standard  Oil  Company.  I 
admit  that  good  management,  brains  and 
skill  have  kept  it  compact  and  strong;  but 
it  has  not  yet  run  its  full  course.  If  it  is  a 
monster  of  oppression,  wipe  it  out.  But  re- 
member, when  you  attempt  to  regulate  manu- 
facturing corporations  by  statutes,  that  you 
are  legislating,  not  against  their  leaders,  who 
can  take  care  of  themselves,  but  against  the 
thousand  innocent  people  who  constitute  their 
stockholders.  To  attack  any  of  these  great 
industrial  bodies  to-day  means  the  destruc- 
tion of  the  property  of  the  innocent  masses, 
and  not  of  the  millionaires. 

Again,    industrial    aggregations  need    no 


Regulation  of  Capital  67 

legislation  to-day.  It  is  a  question  wheth- 
er they  have  not  already  run  their  full 
course. 

Their  creation  is  temporarily  stopped  at 
least  by  natural  conditions.  Can  you  raise 
money  to-day  for  these  industrials?  No. 
Why?  Because  the  market  is  overcharged 
with  them.  The  boa-constrictor  of  specu- 
lation is  gorged,  and  until  he  has  digested 
what  he  has  already  swallowed  he  can  take 
no  more  food,  no  matter  how  tempting  and 
luscious. 

Legislate!  Why,  you  may  as  well  under- 
take to  regulate  the  tide  of  the  Potomac 
River  as  to  fix  by  principles  of  law  the  rules 
of  supply  and  demand  which  operate  in  re- 
gard to  monopoly.  Keep  a  stringent  money 
market,  as  it  is  to-day,  and  you  will  have  no 
more  industrials  built  on  old  lines.  You 
will  become  functus  officio  by  virtue  of  nat- 
ural conditions.  Your  Commission  will 
cease  to  be  necessary  by  virtue  of  the  very 
laws  of  trade  which  you  are  asked  to  guide 
and  control. 


68  Commercial  Trusts 

"Every  European  Government  which  has 
legislated  much  respecting  the  loss  of  trade 
has  acted  as  if  its  main  object  were  to  suppress 
the  trade  and  ruin  the  traders.  Instead  of 
leaving  the  natural  industry  to  take  its  own 
course  it  has  been  troubled  by  an  interminable 
series  of  regulations,  all  intended  for  its  good 
and  all  inflicting  serious  harm."*  **By  their 
laws  against  usury  they  have  increased  usury." 
(Ibid.) 

Not  that  I  wish  to  see  you  go  out  of  exist- 
ence; I  v^ould  continue  you  and  your  suc- 
cessors, forever.  A  commission  of  inquiry 
is  the  instrumentality  that  stands  between 
extravagant  and  demagogic  demands  and 
good,  sensible  business  judgment  and  the 
true  interests  of  the  people ;  it  is  the  tribunal 
through  which  every  question  of  currency 
or  interstate  commerce  and  other  great  public 
subjects  should  pass.  Conclusions  filtered 
through  such  a  source  must  be  based  upon 
facts  and  not  speculations;  and  when  laws 
are  framed  after  such  study  the  people  will 
not  see  any  Sherman  anti-Trust  Acts,  or 

♦  Buckle,  p.  20 1. 


Regulation  of  Capital  69 

multitudes  of  other  laws,  unexecuted  upon 
the  statute  books,  and  which  make  the  law 
a  by- word  and  a  reproach.  The  inability  of 
courts  to  carry  out  such  statutes  and  give 
them  effect  is  because  they  are  not  based 
on  any  reasonable  or  sensible  principle  of 
legislation. 

Again,  nor  do  you,  gentlemen,  want  to  in- 
terfere with  combinations  of  capital,  made 
successful  by  ability,  skill  and  good  business 
judgment.  If  a  corporation,  through  good 
management  of  its  directors,  without  violat- 
ing any  law,  either  moral,  religious  or  civil, 
is  able  to  reach  success  in  business,  you  don't 
want  to  be  urged  on  by  feelings  of  envy,  pas- 
sion or  prejudice  to  cut  it  down  or  to  uproot 
it.  If  you  find,  in  considering  this  question, 
that  the  combination  of  skill  and  good  judg- 
ment in  business  has  brought  about  a  suc- 
cessful result,  I  say  all  things  prompt  you  to 
encourage  it  rather  than  to  discourage  it, 
and  if  you  can  do  nothing  better  you  should 
let  it  alone. 

It  is  not  true  business  judgment  to  pull 


^o  Commercial  Trusts 

down  industrial  structures  at  the  bidding  of 
a  few — shall  I  call  them  speculative  poli- 
ticians?— who  have  no  actual  business  ex- 
perience, who  have  no  accurate  knowledge 
of  the  laws  of  finance,  economy  or  com- 
merce, but  whose  whole  stock-in-trade  con- 
sists of  a  pack  of  vituperative  epithets  and 
a  string  of  generalities,  which  they  use  to 
encourage  demagogism  among  the  masses 
of  the  people. 

Another  consideration  in  connection  with 
these  industrials  is  entirely  overlooked  by 
Masses  their  opponents.       It  is  assumed 

Own  the 

Corporations,  in  all  of  thcir  discussions  that  these 
large  companies  are  owned  by  a  few  capital- 
ists. This  is  absolutely  incorrect.  They 
are  owned  by  thousands  of  people  in  all  sta- 
tions of  life — from  the  most  opulent  rich 
man  to  the  prudent  poor  man  with  a  few 
hundred  dollars  laid  by.  Examine  the  stock 
lists  of  these  so-called  "trusts"  and  see  the 
names  which  they  disclose,  covering  persons 
in  all  occupations  and  all  classes  of  life. 
Their  shares  are  open  to  all;    any  one  who 


Masses  Own  the  Corporations     7 1 

desires  can  purchase  them  and  become  a 
member  of  these  corporations.  Don't  fail 
to  observe  that  there  is  a  difference  between 
fighting  a  promoter  and  banker  and  destroy- 
ing the  property  of  thousands  of  innocent 
purchasers.  When  an  industrial  is  launched 
a  new  regime  is  inaugurated.  It  must  stand 
or  fall  by  natural  conditions.  As  it  is  eco- 
nomically managed ;  as  it  is  properly  organ- 
ized; as  it  is  conservatively  capitalized,  so 
will  it  succeed  or  fail. 

The  gaming-table  is  as  reliable  an  invest- 
ment as  money  placed  in  commercial  com- 
panies where  sound  business  principles  do 
not  prevail. 

Permit  me  in  this  connection  to  show  the 
futility  of  legislation  made  against  the  nat- 
ural laws  of  trade  or  business  by  some  his- 
torical precedents. 

I  maintain  that  all  laws  that  have  been 
made  to  prevent  combinations  of  labor,  to 
prevent  combinations  of  manufactures,  to 
prevent  combinations  in  produce  or  bread- 
stuffs,  or  to  prevent  what  I  may  in  a  word 


72  Commercial  Trusts 

call  the  free  and  unlimited  exercise  of  com- 
mercial relations,  or  speculation  in  cereals  or 
Historical      stocks,  havc  been  ineffectual  and 

and  Legal 

Precedents    abortivc,  cvcry  one  of   them,  and 

that  Legisla-    -^      i      n 

tion  cannot    I  challenge  any  one  to  pomt  out  to 

Control  Natu-  .         -r^        - .   ^  .  .  ,   . 

raiLaws.  Hic  m  English  or  American  his- 
tory any  statutes  which  have  been  passed 
to  prevent  these  combinations,  that  have 
proved  effective.  And  the  simple  reason  is, 
that  the  laws  of  trade,  the  natural  laws  of 
commercial  relations,  defy  human  legisla- 
tion; and  that  is  all  there  is  in  it.  Wher- 
ever the  two  clash,  the  statute  law  must  go 
down  before  the  operations  of  those  natural 
laws.  I  could  begin  back  as  far  as  the  reign 
of  the  Edwards  in  English  history,  and 
trace  the  statutes  that  have  been  passed 
against  combinations  of  labor,  against  the 
combinations  of  the  owners  of  produce, 
combinations  of  purchasers  of  or  dealers  in 
breadstuffs,  and  I  can  show  you  that  in 
every  instance  these  laws  have  been  abortive. 
Whoever  has  the  desire  can  find  plenty  of 
these  instances  in  history.     I  will  select  a  few 


Legal  Control  73 

examples  to  show  the  truth  and  foundation 
of  my  remarks. 

First. — Laws  against  forestalling,  etc. 

The  offence  of  forestalling  was  descri^  ed  by- 
statute,  passed  in  the  reign  of  Edward  VI.,  to 
be  the  buying  or  contracting  for  any  mer- 
chandise or  victual,  coming  in  the  way  to 
market,  or  dissuading  persons  from  bringing 
their  goods  or  provisions  there,  or  persuading 
them  to  enhance  the  price  when  there ;  any  of 
which  practices  makes  the  market  dearer  to 
the  fair  trader. 

Regrating  was  described  by  the  same 
statute  to  be  the  buying  of  com  or  other 
dead  victual  in  any  market,  and  selling  it 
again  in  the  same  market,  or  within  four  miles 
of  the  place.  This  was  supposed  to  enhance 
the  price  of  provisions,  as  every  successive 
seller  must  have  a  successive  profit ! 

Engrossing  was  the  getting  into  one's 
possession,  or  buying  up,  large  quantities 
of  com  or  other  dead  victuals,  with  intent 
to  sell  them  again.     These  offences  are  all 


74  Commercial  Trusts 

described  in  Blackstone's  Commentaries,  and 
are  thoroughly  famihar  to  the  legal  profes- 
sion. In  respect  to  the  offence  of  engrossing, 
that  author  says:  "  This  must,  of  course,  be 
injurious  to  the  public,  by  putting  it  in  the 
power  of  one  or  two  rich  men  to  raise  the 
price  of  provisions  at  their  own  discretion." 
Sir  William  Blackstone  should  have  lived  to 
see  the  results  of  some  comers  in  wheat. 
His  sympathy  would  have  been  extended, 
not  to  the  consumer,  but  to  the  rich  men  who 
attempted  to  play  with  the  fire  of  cereal 
speculation,  and  who  came  out  of  the  ordeal  so 
singed  and  depleted  as  to  be  unrecognizable. 
All  the  statutes  of  Edward  VI.  in  regard  to 
regrators,  forestallers  and  engrossers,  as  well 
as  many  other  similar  statutes  which  in- 
fringed upon  the  freedom  of  commerce,  were 
repealed  in  1772  as  detrimental  to  trade  by  a 
statute  of  George  III.,  the  preamble  and  sub- 
stance of  which  are  shown  in  the  following 
extract : 

"Whereas,  it  hath  been  found  by  experience 
that  the  restraints  laid  by  several  statutes  upon 


Legal  Control  75 

the  dealing  in  corn,  meal,  flour,  cattle  and  sun- 
dry other  sorts  of  victuals,  by  preventing  a  free 
trade  in  said  commodities,  have  a  tendency  to  dis- 
courage the  growth  and  to  enhance  the  price  of  the 
same,  which  statutes,  if  put  into  execution, 
would  bring  great  distress  upon  the  inhabitants 
of  many  parts  of  this  kingdom,  *  *  *  be  it 
therefore  enacted  that  an  act  made  in  the  third 
and  fourth  year  of  King  Edward  the  Sixth, 
entitled  an  act  for  the  buying  and  selling  of 
butter  and  cheese ;  and  also  an  act  made  in  the 
fifth  and  sixth  year  of  King  Edward  the  Sixth, 
entitled  an  act  against  regrators,  forestallers  and 
engrossers;  and  also  an  act  made  in  the  third 
year  of  Philip  and  Mary,  entitled  an  act  for 
keeping  milch  kine,  and  for  breeding  and  rearing 
of  calves;  and  also  an  act  made  in  the  fifth  year 
of  Queen  Elizabeth,  entitled  an  act  touching 
badgers  of  corn  and  drovers  of  cattle  to  be 
licensed;  and  also  an  act  made  in  the  fifteenth 
year  of  King  Charles  the  Second,  entitled  an 
act  to  prevent  the  selling  of  live,  fat  cattle  by 
butchers;  and  so  much  of  an  act  made  in  the 
fifth  year  of  Queen  Anne,  entitled  an  act  for  con- 
tinuing the  laws  therein  mentioned  relating  to 
the  poor,  and  to  the  buying  and  selling  of  cattle 
in  Smithfield,  and  for  suppressing  of  piracy,  as 
relates  to  butchers  selling  cattle  alive  or  dead 
within  the  cities  of  London  and  Westminster, 
or  within  ten  miles  thereof;    and  all  the  acts 


7^  Commercial  Trusts 

made  for  the  better  enforcement  of  the  same 
being  detrimental  to  the  supply  of  the  laboring  and 
manufacturing  poor  of  this  kind  shall  be,  and  the 
same  are  hereby  declared  to  be,  repealed." 

And  in  this  connection,  I  beg  to  call  your 
attention  to  what  was  known  as  the  ''  Bubble 
Act,"  which  was  passed  in  the  reign  of  George 
the  First  *  The  ''  Bubble  Act"  grew  out  of 
the  South  Sea  speculation,  and  in  some  aspects 
it  was  one  of  the  most  remarkable  instances 
of  speculation  in  the  world,  almost  outri vai- 
ling Law's  famous  French  scheme.  The 
"Bubble  Act"  was  passed  about  1718,  and 
it  undertook  to  prevent  a  recurrence  of  the 
losses  to  the  English  nation  sustained  through 
the  South  Sea  Bubble.  The  horses  having 
escaped,  the  wise  legislators  cautiously  closed 
the  stable  doors.  I  won't  stop  to  explain 
what  the  South  Sea  Bubble  was.  You,  gentle- 
men, know,  or  if  you  do  not,  it  is  easy  to  find 
a  history  of  it  in  any  ordinary  library.  But 
the  statute,  the  ''Bubble  Act,"  was  passed  to 
prevent  prospectuses  being  issued  of  a  kind 

*  9  East's  Reports,  p.  517. 


Legal  Control  ^^ 

which  would  seduce  capital  into  speculation. 
It  was  supposed  that  so  many  people  had  lost 
money  through  the  instrumentality  of  these 
prospectuses,  which  were  gotten  up  in  the 
most  glaring  form,  that  it  was  necessary  to 
have  legislation,  and  they  passed  that  law  of 
George  the  First,  in  which  they  made  it  a 
crime  for  anybody  to  print  and  publish  or  cir- 
culate any  descriptions  of  enterprises  for  the 
purpose  of  alluring  capital  to  subscribe.  That 
statute  remained  in  existence  more  than  a 
hundred  years;  I  think  it  was  repealed  in 
1837.  And  thus  another  monument  was 
erected  to  warn  legislators  how  vain  it  is  to 
endeavor  to  furnish  brains  to  the  commu- 
nity, to  keep  the  public  from  being  entrapped 
or  deceived  by  the  wiles  of  speculation. 

There  was  but  one  application  made  to 
the  Court  under  it,  and  that  was  made  to 
Lord  Ellenborough  in  1808.  The  Attorney- 
General,  at  the  solicitation  of  a  private  per- 
son, asked  the  Court  for  an  information, 
which  is  a  criminal  process  in  the  nature  of 
^n  indictment,  issuing  at  the  instance  of  the 


7^  Commercial  Trusts 

Attorney-General.  It  seemed  in  that  case 
that  the  "promoters"  of  the  enterprise  were 
endeavoring  to  raise  money  to  float  the ''  Lon- 
don Paper  Manufacturing  Company,"  a  con- 
cern that  would  answer  to  what  they  now  call 
the  '*  Paper  Trust,"  and  also  the  "  London 
Distillery  Company  for  making  and  rectifying 
genuine  British  spirits,"  which  would  answer 
to  the  present  combination  properly  called  the 
'  *  Whiskey  Trust . "  These  were  perfectly  legal 
occupations,  and  perfectly  legitimate  indus- 
trial enterprises;  but  the  prospectuses  were 
contrary  to  the  ''  Bubble  Act,"  and  some  per- 
son, prompted  by  feelings  of  malice  or  envy  or 
what  not,  some  illegitimate  influence  operat- 
ing upon  him,  applied  to  the  Court  to  put  in 
operation  that  statute  eighty-seven  years 
after  it  had  been  passed.  It  had  never  once 
been  heard  of;  had  become  a  dead-letter 
statute,  and  Lord  Ellenborough  said  sub- 
stantially, "Well,  the  people  of  this  country 
have  forgotten  all  about  the  existence  of  that 
statute,  and  the  complainant  comes  into 
Court  in  such  a  peculiar  position  that  I  will  not 


Legal  Control  79 

grant  him  any  relief" ;  and  that  was  the  last 
that  was  ever  heard  of  that  statute,  but  out 
of  this  great  South  Sea  Bubble  was  built  a 
lighthouse  to  warn  the  unwary  and  innocent 
against  the  shoals  of  speculation. 

The  crime  that  the  defendants  in  that  case 
were  charged  with  was  this :  They  claimed  in 
the  prospectus  that  every  person  who  sub- 
scribed to  the  capital  would  get  a  share  which 
was  transferable,  and  thus  relieve  himself 
from  all  liability  beyond  the  amount  of  his 
subscription;  and  as  there  was  no  corpora- 
tion act  in  England  at  that  time,  the  repre- 
sentation was  false,  because  they  were  all 
partners,  and  that  was  the  basis  on  which  an 
application  was  made  to  the  Court.  An  act 
which  would  now  be  recognized  as  perfectly 
legal,  if  not  meritorious,  was  then  by  hasty, 
ill-conceived  legislation  made  a  heinous 
crime. 

This  case,  in  1808,  illustrates  that  the  stage 
of  commercial  progress  had  not  been  reached 
which  justified  the  creation  of  corporations, 
and  being  in  advance  of  commercial  necessity, 


8o  Commercial  Trusts 

it  was  stamped  as  illegal,  although  the  busi- 
ness involved  was  perfectly  legitimate.  It 
was  sought  to  be  carried  out  through  the  form 
of  a  trust,  but  neither  the  Courts  nor  the 
Statute  condemned  that  form — they  merely 
condemned  the  transaction  because  the  age 
had  not  yet  sanctioned  stock  certificates! 
The  age  had  not  yet  learned  to  look  upon  the 
importance  of  transferring  interests  in  indus- 
trial enterprises — one  of  the  most  important 
and  necessary  elements  of  commercial  affairs 
—  without  which,  to-day,  the  wheels  of 
finance  would  be  stopped.  Mark  the  im- 
portance and  interest  of  that  case.  The 
"trust"  was  not  attacked  —  now  the  sole 
cause  of  discontent, — but  the  transferability 
of  shares — now  universally  acquiesced  in! 

Second. — Combinations  among  victuallers 
or  artificers,  to  raise  the  price  of  provisions, 
or  any  commodities,  or  the  rate  of  labor,  were 
also  in  many  cases  severely  punished  by  par- 
ticular statutes.*    All  of  the  Statutes  were 

*  See  2  and  3  Edwd.  VI.,  c.  15. 


Legal  Control  8i 

repealed  as  futile  and  contrary  to  the  true 
commercial  progress  of  England. 

Third. — Monopolies  were  also  attacked. 
Queen  Elizabeth  granted  them,  but  in  the 
beginning  of  the  reign  of  James  the  First,  Sir 
Edward  Coke  boldly  and  justly  assaulted 
them,  and  in  consequence  a  statute  was 
passed  in  the  same  reign,  declaring  monopo- 
lies to  be  contrary  to  law  and  void. 

The  Queen  granteth  and  the  Parliament 
taketh  away;  and  blessed  is  the  name  of 
that  Parliament! 

Fourth. — I  now  call  your  attention  to 
"  Sir  John  Barnard's  Act,"  which  grew  out  of 
unhealthy  speculations  in  stocks.  After  the 
East  India  Company  had  gotten  under  way, 
and  the  Bank  of  England  was  established, 
there  was  an  enormous  speculation  in  stocks, 
and  Sir  John  Barnard's  Act  was  passed  for  the 
purpose  of  preventing  these  speculations. 
Well,  that  act  was  to  forever  rid  the  English 
nation  of  the  curse  of  speculation.     A  lovely 

6 


82  Commercial  Trusts 

and  commendable  purpose !  But,  alas !  what 
was  the  result  ?  Speculation  increased.  There 
was  not  a  solitary  conviction  ever  had  under 
it,  so  far  as  I  can  ascertain,  and  it  remained 
on  the  statute  books  down  to  the  early  part  of 
the  reign  of  the  present  Queen,  when  it  was 
repealed,  and  I  quote  the  preamble  to  the 
repealing  clause  to  show  what  a  confession 
the  British  Parliament  was  forced  to  make 
as  to  the  inefficacy  of  such  legislation. 

"Whereas  an  act  was  passed,  in  the  seventh 
year  of  the  reign  of  King  George  the  Second, 
chapter  eight,  to  prevent  the  practice  of  stock- 
jobbing, and  by  another  act,  passed  in  the  tenth 
year  of  the  said  King's  reign,  chapter  eight,  the 
said  first-mentioned  act  was  made  perpetual. 
And  whereas  the  said  acts  impose  unnecessary 
restrictions  on  the  making  of  contracts  for  the  sale 
and  transfer  of  public  stocks  and  securities,  and 
it  is  therefore  expedient  to  repeal  the  same :  Be 
it  enacted  *  *  *  the  same  are  hereby  re- 
pealed. " 

Statutes  prohibiting  stock  speculation  were 
also  adopted  in  New  York  and  Pennsylvania, 
but  have  long  since  been  repealed,  after  lin- 


Speculations  in  Gold  83 

gering  ineffectually  upon  the  statute  books. 
The  law  in  New  York,  which  was  in  existence 
from  1812  to  1858,  without  any  deterrent 
effect  upon  the  supposed  evils  it  was  passed 
to  prevent,  was  not  only  repealed  in  the  last 
named  year,  but  the  repealing  law,  recog- 
nizing the  necessity  of  stock-trading,  went 
further  and  absolutely  legalized  "short 
sales.'* 

Fifth. — The  most  notable  example,  how- 
ever, of  this  species  of  legislation  is  to  be 
found  in  this  country,  and  it  grew  speculations 
out  of  speculations  in  gold  which  inooid. 
caused  an  enormous  agitation  and  excite- 
ment in  Wall  Street,  as  you,  gentlemen,  can 
remember  from  history,  perhaps  some  of  you 
personally.  The  effect  and  influence  of  the 
speculation  in  gold,  it  was  thought,  was  so 
detrimental  to  the  interests  of  this  country, 
that  Congress  was  invoked  to  pass  a  statute 
to  prevent  it,  and  it  promptly  did  it;  it 
passed  a  law  in  1864,  in  June  of  that  year, 
which  you  will   find  in  the  United   States 


84  Commercial  Trusts 

Statutes,  by  which  it  was  made  a  crime  for 
persons  to  sell  and  deal  in  gold  unless  they 
were  the  owners  of  the  coin. 

Now,  what  was  the  effect  of  that  statute? 
So  absolutely  ineffectual,  futile  and  absurd 
was  the  legislation  that  gold  went  up  thirty 
points  the  next  day,  and  fifteen  days  after- 
wards, by  the  same  Congress,  the  act  was  re- 
pealed because  it  was  regarded  as  being 
absolutely  detrimental  to  the  interests  of  the 
country.  Some  enthusiasts,  if  you  will  call 
them  by  that  mild  name,  bombarded  Con- 
gress with  the  cry  of  legislation,  and  Congress 
succumbed  into  the  arms  of  her  new  love, 
with  the  effect  that  gold  advanced,  and  they 
repealed  the  law  in  fifteen  days.  A  legiti- 
mate effect  of  legislating  against  the  comet ! 

Sixth. — Now,  I  bring  you  down  to  our  own 
immediate  legislation — what  I  call  contem- 
u.  s.  Anti-     poraneous  legislation — against  ag- 

trust  Law 

of  1890.  gregated  capital,  and  I  draw  your 
attention  again  to  the  Federal  Anti-trust 
Act  of  1890. 


Anti-Trust  Law  85 

That  act  was  passed  in  1890.  I  shall  not 
analyze  or  discuss  it.  Why  are  you  here? 
Why  are  you,  gentlemen,  sitting  here  and 
deliberating,  when  you  have  already  on  the 
statute  books  an  act  drawn  by  an  astute 
statesman,  which  illegalizes  all  combinations, 
making  it  a  misdemeanor  to  have  combina- 
tions in  restraint  of  trade  ?  Why  do  you  want 
more  legislation?  Is  n't  that  statute  enough? 
Can  you  find  broader  or  more  condemnatory 
language  than  that  used  in  this  Sherman 
Anti-trust  Statute  ?  If  yea,  how  will  you  vary 
it,  and  what  amendments  will  you  make  to 
that  legislation,  which  will  conform  to  the 
principles  of  Federal  jurisprudence,  and  to 
the  relation  which  this  government  bears  to 
the  different  States? 

Again,  you  have  the  States'  statutes  against 
"  Trusts."  I  will  not  quote  them..  I  merely 
recall  them  to  your  attention  in  this  connec- 
tion. Examine  them,  and  you  will  see  their 
inconsistencies;  you  will  see  how  one  State 
murders  one  industry,  and  encourages  an- 
other ;  how  one  undertakes  to  separate  labor 


86  Commercial  Trusts 

from  capital;  pats  agriculture  on  the  back, 
and  kicks  industrials  and  manufactures. 

These  vast  aggregations  of  labor,  and  ag- 
gregations of  money,  and  aggregations  of 
goods  are  in  principle  the  same;  you  must 
not  shrink  from  the  responsibility  that  is 
upon  you;  if  you  determine  that  we  must 
have  more  legislation,  you  must  also  legislate 
against,  or  at  least  in  respect  to,  labor.  Labor 
is,  at  least,  as  important  as  capital,  and  the 
man  who  undertakes  to  separate  the  two  will 
involve  and  perplex  this  important  economic 
subject.  If  it  be  wrong  to  combine  indus- 
trials or  aggregate  capital,  it  is  equally  hein- 
ous to  combine  labor.  They  must  each  be 
restrained,  or  each  have  the  fullest  latitude  of 
action.  There  can  be  no  half-way,  com- 
promising measure. 

And  I  also  call  your  attention  to  another 
fact:  there  have  been  seven  judicial  deci- 
sions, at  least,  on  questions  of  industrial 
combinations;  we  have  had  a  decision  in 
the  Courts  of  New  York  which  condemned 
the  "  Sugar  Trust " ;  we  have  had  one  in  Ohio 


Anti-Trust  Law  87 

which  condemned  the  Standard  Oil  trust; 
the  Biscuit  trust  has  been  declared  illegal, 
and  the  Whiskey  trust  has  been  pronounced 
unlawful,  and  three  others  have  been  like- 
wise condemned.  Every  time  that  these 
questions  have  come  up  before  the  Courts, 
they,  on  principles  of  common  law,  or  by 
virtue  of  statute,  or  both,  have  declared 
these  consolidations  illegal.  The  Courts  are 
clothed  with  ample  power,  under  the  common 
law  rules  of  public  policy  and  the  doctrine  of 
restraint  of  trade,  to  guard  the  interests  of 
the  public  against  combinations  dangerous 
or  hurtful  to  public  interests.  And  yet  how 
these  so-called  ''trusts"  thrive  on  adverse 
legislation  and  decisions!  Every  judgment 
of  a  Court  pronouncing  them  illegal  is  the  sig- 
nal for  the  creation  of  more  of  the  same  kind. 
And,  therefore,  I  submit  that  no  legisla- 
tion is  adequate  to  meet  the  new  and,  as  yet, 
unknown  quantity  of  industrial  combina- 
tions. Exhaust  the  bountiful  stock  of  law 
which  you  now  have  on  hand,  before  you 
command  a  new  supply. 


88  Commercial  Trusts 

Are  you  here  to  fight  against  the  mere 
form  of  things?  If  you  are,  I  have  wasted 
Is  Legislation  ^Y  time  in  appearing  before  you, 
Regu^at7*°  ^^^  yo^  hdiYe  wasted  yours  in  sit- 
••  Trusts"?    ^jj^g  j^gj.g   ^g   ^   commission.     Do 

you  care  what  form  aggregated  capital  as- 
sumes— whether  it  is  in  the  form  of  the  old 
common  law  trust,  or  whether  it  is  in  the 
form  of  a  consolidation  or  a  partnership  or 
corporation?  What  is  to  be  the  result  of 
this  commission  if  you  are  to  conclude  that 
corporations  may  not  form  a  partnership  be- 
tween themselves?  what  effect  does  that 
have  on  the  question?  If  you  legislate  that 
all  trusts,  common  law  trusts,  are  illegal,  that 
goes  to  the  form.  The  substance  of  the 
transaction,  be  it  remembered  here,  means 
the  extirpation  of  the  carefully  evolved  com- 
mercial system  of  this  country,  and  it  means 
nothing  less.  I  say  the  fight  against  aggre- 
gated capital  has  so  far  been  a  vain  fight 
against  the  mere  form,  and  when  it  assumes 
a  serious  position,  when  it  gets  to  a  point 
that  it  means  to  earnestly  attack  the  sub- 


Regulation  of  Trusts  89 

stance,  then  the  contest  will  be  to  wipe  out 
the  commercial  system  of  this  country,  and 
I  ask  if  there  is  any  man  in  this  room,  or  any 
man  in  this  country,  who  is  ready  to  go  to 
that  extent?  That  is  the  proposition;  I  do 
not  care  whether  you  allow  aggregated  cap- 
ital to  exist  in  the  form  of  a  trust ;  I  do  not 
care  whether  you  allow  it  to  be  in  the  form 
of  a  partnership  or  corporation ;  if  it  is  bad, 
it  is  equally  as  bad  in  the  last  form  as  it  is  in 
the  two  others.  And  you  are  confronted 
with  the  question,  if  you  mean  to  legislate, 
if  you  must  legislate,  of  wiping  out  and  ex- 
tirpating a  system  under  which  this  country 
has  grown  and  developed  and  become  as 
prosperous  as  it  is,  for  without  the  corpora- 
tions, without  the  power  of  combined  finan- 
cial action,  we  never  would  have  reached  the 
remarkable  condition  of  commercial  and 
physical  prosperity  which  we  now  enjoy,  to 
the  envy  of  the  balance  of  the  world.  Of 
course  it  is  easy  to  remedy  the  supposed 
evils  of  aggregated  capital.  You  can,  if 
you  are  prepared  to  take  such  a  step,  wipe 


90  Commercial  Trusts 

corporations  from  the  statute  books  of  this 
country,  or  so  cripple  them,  by  curtaiHng 
their  inherent  powers,  as  to  make  them  im- 
potent. But  he  is  a  bold  man  who  will  ad- 
vocate such  revolutionary  measures.  You 
can  cut  the  throat  of  aggregated  capital  with 
the  smallest  knife  of  legislation;  but  who 
will  commit  the  murder? 

If  corporations  were  bad,  if  aggregated 
capital  were  pernicious,  if  it  distilled  poison 
into  the  veins  of  the  commerce  and  labor  of 
this  country,  the  time  to  have  acted,  if  any 
action  could  be  successful,  was  to  have 
throttled  the  corporation  in  its  cradle,  forty 
years  ago;  but  now,  when  it  is  entwined 
around  every  branch  of  our  commercial  de- 
velopment, its  destruction  means  the  end  of 
our  present  commercial  system,  or  it  means 
a  wretched,  unseemly,  in  every  way  disas- 
trous struggle  between  vindictive  legislation 
and  the  natural  law,  which  will  still  operate, 
however  much  it  may  be  compelled  to  stoop 
to  trick  and  evasion. 

And  in  this  connection  we  are  brought 


Regulation  of  Trusts  91 

face  to  face  with  the  question  whether  new 
legislation  is  required  to  regulate  or  destroy 
these  new  organizations.  We  are  taught  by 
men,  who  have  made  a  study  of  those  nat- 
ural laws,  which  furnish  the  foundation  for 
human  legislation,  that  there  are  three  things 
to  be  considered  when  new  laws  are  to  be 
made.  The  first  is  that  you  must  consider 
the  old  law.  What  is  the  old  law  ?  Second, 
what  is  the  mischief  that  the  old  law  does 
not  prevent?  And  third,  what  is  the  rem- 
edy proposed  ? 

Now  it  is  well  settled  that  courts  of  equity 
possess  the  right  to  regulate  or  stop  these 
commercial  organizations  or  aggregations  of 
capital  when  they  are  considered  pernicious 
by  virtue  of  the  doctrine  of  public  policy. 
Then  we  have  the  Sherman  statute;  you 
know  its  history.  We  have,  in  addition,  the 
statutes  of  the  various  States,  and  you  know 
their  histories. 

Here  is  a  vast  fund  of  equitable  and  statu- 
tory law  upon  which  the  public  may  draw 
in  any  emergency. 


92  Commercial  Trusts 

I  ask,  then,  what  is  the  mischief  which  is 
to  be  remedied?  That  is  the  question  that 
this  Commission  must  address  itself  to.  Are 
you,  to-day,  satisfied  that,  since  the  inaugu- 
ration of  these  industrials,  they  have  been 
pernicious  and  detrimental  to  the  people  of 
this  country?  Can  each  member  of  this 
Commission  put  his  hand  upon  his  heart, 
and  say,  as  a  good  citizen,  that  the  records 
of  this  Commission  are  full  of  evidence 
which  shows  that  these  industrial  enter- 
prises are  evil?  Can  you,  in  face  of  the 
extraordinary  commercial  development  of 
this  country,  in  face  of  existing  favorable 
financial  and  industrial  conditions,  say  that 
you  are  convinced  that  there  are  evils  which 
spring  from  these  industrials?  If  so,  you 
must  stop  them.  I  claim  to-day  that  there 
has  not  been  a  statement  which  an  intelli- 
gent man  could  answer,  pointing  out  in  a 
specific  manner  the  actual  evils  which  have 
flowed  from  the  inauguration  of  these  enter- 
prises. You  say  over-capitalization;  well, 
that  is  a  question  of  detail,  that  is  a  question 


Regulation  of  Trusts  93 

about  which  men  may  possibly  disagree.  If 
you  think  that  corporations  should  be  capi- 
talized upon  the  basis  of  the  actual  value, 
why,  you  will  find  a  great  many  people  who 
will  agree  with  you.  If  you  find,  on  the 
contrary,  that  they  should  be  capitalized  on 
the  basis  of  the  profits,  you  will  find  many 
more  people  who  will  agree  with  you.  If 
you  think  this  question  should  remain  un- 
touched, to  be  left  with  the  parties  them- 
selves who  are  making  the  organizations, 
because  you  believe  that  this  question  of 
capitalization,  one  way  or  the  other,  is  not 
a  fimdamental  question,  but  is  influenced 
and  controlled  by  the  operation  of  natural 
laws  and  of  particular  conditions,  then  leave 
it  alone.  But  these  are  questions  of  detail; 
they  do  not  go  to  the  substance  or  root  of 
this  matter. 

Perhaps  it  will  be  said  that  individuals 
have  appeared  before  you  who  have  suffered 
from  aggregated  capital.  That  may  be  true. 
The  individual  cases  may  be  serious,  they 
may  be   grievous,  they  may  appeal  to  our 


94  Commercial  Trusts 

sympathies,  but,  in  the  great  progress  of  com- 
mercial development,  some  must  go  under, 
some  must  suffer,  some  must  be  crushed, 
and  that  has  been  an  inevitable  rule  from 
the  beginning  of  the  world.  If  you  had  sat 
as  a  commission  years  ago,  when  the  sewing 
machine  was  introduced,  you  would  have 
had  hundreds  of  supplicants  coming  before 
you  asking  legislation  against  it.  Individ- 
uals do  suffer  and  must  suffer  from  the 
consequences  of  the  general  march  of  com- 
mercial and  manufacturing  progress.  In 
that  war  of  commercial  development,  the 
batteries  of  science  and  skill  wound  and 
kill  their  own  countrymen  and  allies. 

A  great  philosopher,  Jeremy  Bentham, 
was  the  author  of  the  phrase,  and  the  ex- 
pounder of  the  great  principle  of,  "The 
greatest  good  for  the  greatest  number" — 
the  only  practical  basis  upon  which  you  can 
successfully  carry  on  government.  Society 
is  so  constituted  that  some  must  suffer.  It 
is  the  sacrifice,  that  the  few  are  forced  to 
make,  for  the  good  of  the  whole.     Take  the 


Regulation  of  Trusts  95 

police  and  the  school  relation,  in  which  you 
are  interested.  A  man  lives  in  a  village, 
and  has  his  own  governess  to  teach  his  chil- 
dren, and  also  has  his  own  man  in  the  house ; 
and  he  says  to  the  authorities  of  the  village : 
**  You  impose  a  tax  on  me  for  public  schools ; 
I  don't  need  them,  my  children  are  taught 
at  home ;  nor  do  I  want  your  police ;  I  have 
a  man  who  performs  that  duty  very  well  for 
me;  I  don't  need  the  police  and  I  will  not 
pay  the  tax."  Well,  where  does  such  a  man 
stand?  He  must  go  down  before  the  logic 
or  argument  of  general  good  —  the  needs 
of  the  country  require  common  schools,  and 
they  demand  a  police  force.  There  is  no 
principle  of  legislation  that  can  be  formulated 
without  stepping  upon  the  toes  of  some  in- 
nocent people,  who  must  suffer  for  the  good 
of  the  whole.  Undoubtedly  some  individ- 
uals— perhaps  a  great  many — must  suffer 
from  the  establishment  of  industrial  com- 
binations. The  little  grocer,  the  small  haber- 
dasher, the  middleman,  the  salesman,  the 
traveller,  may  have  just  cause  of  complaint. 


9^  Commercial  Trusts 

but  the  government  is  not  made  to  adjust 
these  things  or  to  remedy  such  evils.  We 
are  not  Hving  in  the  millennium.  We  are 
not  governed  by  abstractions,  nor  is  the 
State  influenced  by  sympathy.  These  are 
cruel  facts,  but  no  less  inevitable  than  that 
the  sparks  fly  upwards. 

I  do  not  mean  to  assert  to  you,  gentlemen, 
that  aggregated  capital  is  an  unmitigated 
virtue,  without  accompanying  vices.  What 
I  have  been  endeavoring  to  impress  upon 
you  is  the  necessity  of  going  slowly  in  your 
acts.  I  have  been  endeavoring,  by  invoking 
historical  analogies,  to  show  you  how  easy  it 
is  to  make  laws,  and  that  the  fruits  of  hasty 
legislation  not  only  bring  the  courts  of  jus- 
tice and  the  administration  of  the  law  into 
reproach,  if  not  to  say  contempt,  but  fail  to 
accomplish  the  purpose  at  which  the  legisla- 
tion is  aimed. 

Now,  what  can  more  forcibly  illustrate  the 
strength  of  that  remark  than  the  anti-trust 
law  of  the  United  States?  I  do  not  suppose 
that  the  author  of  that  law  ever  conceived 


Regulation  of  Trusts  97 

the  idea  or  intention  of  affecting  by  that 
piece  of  legislation  the  railroad  interests  of 
the  country.  And  yet  we  have  this  remark- 
able result,  that  the  industrial  and  manufac- 
turing corporations,  as  contra-distinguished 
from  railroad  corporations,  have  escaped  the 
law,  as  we  see  in  the  case  of  Knight*,  the 
sugar  refining  case  from  Philadelphia,  where 
the  United  States  Supreme  Court  held  that, 
although  the  effect  of  combining  sugar  re- 
fining businesses  created  a  monopoly  in  the 
manufacture  of  a  necessary  of  life,  yet  it 
could  not  be  suppressed  under  the  Sherman 
Act  of  1890,  because  it  was  not  a  restraint 
of  interstate  trade  or  commerce. 

But,  strange  to  say,  the  railroad  corpora- 
tions, which,  I  think,  were  not  intended  to 
be  embraced  in  the  law,  were  made  the  suf- 
ferers by  that  legislation!  And  in  the  two 
decisions,  in  the  Missouri  case,  and  in  the 
freight  cases  about  which  you  know,  to  the 
reports  of  which  I  need  not  refer,  the  Supreme 
Court  held  that  the  language  of  the  Act  of 

*  156  U.  S.  Reports,  i. 


9^  Commercial  Trusts 

1890  applied  to  railroads,  and  contracts 
which  were  generally  conceded  to  be  fair  and 
beneficial  to  the  public  were  set  aside  as 
illegal.  I  have  no  criticism  to  make  of  these 
decisions.  But  see  the  paradoxical  result! 
A  scheme  of  legislation,  which  aimed  at  manu- 
facturing and  industrial  corporations,  is  de- 
clared not  applicable  to  them,  and  railroad 
corporations,  which  were  not  intended  to  be 
covered,  are  held  to  be  within  the  language 
and  spirit  of  the  statute !  He  must  be  a  wise 
man  and  a  good  lawyer  to  draw  a  statute,  and 
both  of  these  characters  are  scarce  to-day. 

I  do  not  claim  here  that  there  are  not  great 
and  grave  questions  surrounding  the  aggre- 
Eviis  of  gation  of  capital,  in  any  form  it 
Trusts.  ^g^y  assume,  whether  it  is  held  by 
an  individual,  a  partnership,  or  a  corporation. 
It  is  a  matter  of  profound  solicitude  to  every 
citizen  of  this  country,  a  matter  of  profound 
importance  in  the  development  of  this  coun- 
try, in  all  its  operations,  but  I  say  that  the 
subject  has  not  approached  a  ripe  and  mature 
condition.     I  say  that  if  you  take  the  vague, 


Evils  of  Trusts  99 

indefinite  and  crude  thoughts  which  up  to 
this  time  characterize  the  discussion  of  this 
question,  and  put  them  in  the  crucible  of 
legislation,  nothing  tangible,  practical  and 
beneficial  to  the  people  will  come  from  the  ex- 
periment. That  is  all.  You  must  keep  your 
eyes  upon  this  modem  octopus,  whether  it  is 
in  individual  or  corporate  form,  but  until  ag- 
gregated capital  commits  some  indisputable 
blow  against  the  liberties  of  the  people,  until 
it  strikes  at  the  foundation  of  our  institu- 
tions, or  until  it  interferes  with  the  adminis- 
tration of  justice  or  legislation  in  some 
positive  way,  I  say  that  it  is  futile  and  un- 
necessary to  enact  any  laws,  because  you 
have  no  defined,  fixed,  intelligent  purpose  in 
view,  and  without  such  purpose  you  are 
absolutely  at  sea,  and  the  very  laws  that  you 
make  will  strike  at  people  whom  you  never 
contemplated  they  would  reach,  and  proba- 
bly, if  not  certainly,  permit  the  aggregations 
of  capital,  intended  to  be  embraced,  to 
entirely  escape. 

It  may  be  that  the  effects  of  combinations. 


loo  Commercial  Trusts 

or  the  effects  of  the  aggregation  of  wealth  or 
capital,  may  produce  corruption  in  the  legis- 
lative and  judicial  powers  of  the  government. 
There  is  the  great  danger,  in  my  opinion. 
But  no  law  that  you  can  frame  can  reach  this 
supposed  evil  by  anticipation,  because  you 
do  not  know  what  form  it  may  take.  For 
direct  corruption,  the  existing  penal  laws  of 
the  Nation  and  the  States  are  amply  suffi- 
cient, and  need  nothing  in  the  form  of  fresh 
laws. 

Judicial  or  legislative  corruption,  however, 
is  often  provoked  by  demagogism,  which 
presses  corporations  to  seek  for  their  just 
rights  by  illegitimate  means.  It  is  a  public 
saying,  unfortunately,  in  this  country,  that 
no  corporation  can  get  proper  and  necessary 
privileges  without  a  lobby.  I  wish  you, 
gentlemen,  to  ponder  deeply  over  that  aspect 
of  the  question.  A  corporation  goes  to  a 
mimicipal  legislative  body,  and  wishes  a  cer- 
tain privilege,  which,  if  granted,  will  benefit 
the  public,  yet  the  railroad  men,  and  the  men 
who  control  corporations,  will  tell  you  that 


Evils  of  Trusts  loi 

it  cannot  be  obtained  by  legitimate  methods. 
Now,  there  is  no  need  to  disguise  the  fact  that 
occult  influences  are  used  sometimes  by  large 
corporations,  of  necessity,  to  obtain  things 
which  are  of  the  greatest  importance  to  the 
public,  and  if  you  can  stop  that  end  of  it,  you 
remove  one  great  temptation  to  judicial  or 
legislative  corruption. 

If  demagogism  is  eliminated  from  the  dis- 
cussion of  these  questions  of  aggregated  capi- 
tal, there  is  no  doubt  that  a  solution  will  be 
found  entirely  satisfactory  to  the  true  pro- 
gress and  interests  of  the  cotmtry. 

In  concluding  this  branch  permit  me  to 
repeat,  that  it  appears  to  me  that  all  we  have 
to-day  to  found  legislation  upon  is  the  opin- 
ions of  men  who  are  not  qualified  to  speak 
with  any  intelligent  authority;  we  have  the 
vague  and  indefinite  criticisms  of  people  who 
have  not  studied  these  questions  from  the 
standpoint  of  actual  experience  or  the  honest 
conviction  resulting  from  deep  research. 
Whenever  these  critics  appear  before  this 
Commission,  if  they  dare  do  so,   you  will 


I02  Commercial  Trusts 

insist  upon  proof,  upon  statistics,  upon  real 
argument  and  facts,  and  you  will  then  have  a 
basis  upon  which  you  can  build  the  founda- 
tion for  a  law  which  will  be  satisfactory  to  all. 

[Note.— Prof.  J.  W.  Jenks,  the  Expert  Agent  of  the 
United  States  Industrial  Commission,  who,  as  he  says, 
spent  twelve  years  in  the  personal  investigation  of  the 
"Trust  Problems"  and  kindred  subjects,  cautiously 
specifies  under  eight  different  heads  the  evils  which  may 
result  from  consolidations  of  capital.     He  says: 

"  (i)  Investors  of  capital  are  often  grievously 
wronged  through  concealment  of  facts  and  deception 
practised  by  promoters  and  directors  at  the  time  an 
mdustry  is  organized,  and,  later,  through  misrepre- 
sentation of  the  condition  of  business  and  of  the 
methods  in  which  a  business  is  carried  on." 

Happily,  the  law  furnishes  adequate  and  ample 
remedy  to  the  investor  who  is  inveigled  into  buying 
securities  by  false  representations  or  concealment  of 
material  facts,  the  suggestio  falsi  or  the  suppressio  veri. 

"  (2)  A  second  class  of  persons  injured  is  that  of 
the  stockholders.  Directors  not  infrequently  man- 
age the  business  in  their  own  interests,  regardless  of 
those  of  the  stockholders.  At  times  it  is  really  made 
less  profitable,  or  is  so  managed  as  apparently  to  be 
less  profitable,  in  order  to  depress  the  stock  on  the 
market  and  to  enable  the  directors  through  gambling 
speculations  to  reap  large  profits." 

Full  redress  is  given  to  stockholders  for  the  above 
wrongs.  They  have  the  power,  through  the  Courts,  to 
compel  the  directors  or  trustees  to  account  for  any  loss 
which  results  to  the  stockholders  by  reason  of  the  mis- 
management or  fraud  of  the  directors.  There  is  nothing 
in  this  statement  of  grievances  that  is  not  capable  of 
being  redressed  by  present  laws. 


Evils  of  Trusts  103 


"(3)  Persons,  not  members  of  a  corporation,  may 
be  injured  as  consumers  by  high  prices,  which  can  be 
kept  high,  provided  the  combination  can  secure  mo- 
nopolistic power.  The  temptation  to  keep  prices 
above  former  competitive  rates  is,  of  course,  greatly- 
increased  when  the  corporation  has  issued  large 
amounts  of  watered  stock." 

These  grievances  must  be  left  to  be  corrected  by 
natural  conditions.  The  securing  and  exercising  of  real 
monopolistic  power,  except  when  resulting  from 
patents,  can  always  be  remedied  by  the  Courts,  which 
have  power,  when  a  real  monopoly  is  made  out,  of 
stopping  it. 

"  (4)  The  producers  of  raw  material  may  he  injured 
by  low  prices,  which  the  combination,  by  virtue  of  its 
being  the  largest,  if  not  almost  the  sole  buyer,  can 
compel  the  producer  to  accept." 

No  fact  is  given  to  support  this  hypothetical  injury. 
The  learned  professor's  statement  is  purely  suppositi- 
tious, and  no  evidence  is  produced  to  show  that  any 
such  consequence  has  followed.  But  such  a  situation 
can  be  safely  left  to  natural  conditions. 

"  (5)  The  combination  may  so  increase  its  power  as 
to  injure  the  wage-earners  by  compelling  them  to  ac- 
cept lower  wages,  or  to  work  under  less  favorable 
conditions,  than  would  be  granted  by  competing 
concerns.  So,  too,  the  power  exercised,  apparently 
arbitrarily  at  times,  of  closing  part  of  the  plants  to 
avert  a  strike,  or  even  to  affect  the  stock  market,  is 
dangerous." 

This  is  also  hypothetical,  and  no  evidence  is  adduced 
to  show  that  such  conditions  as  are  described  ever 
existed.  They  may  exist,  and  if  they  do,  the  right  of 
labor  to  combine  to  prevent  them,  is  undisputed. 

"  (6)  It  may  happen  at  times  that  the  larger  or- 
ganizations will  exert  so  powerful  an  influence  on  our 
political  organizations  that  the  purpose  of  the  State 
will  be  directed  away  from  the  common  weal." 


I04  Commercial  Trusts 

This  possibility  has  already  been  adverted  to  by  me 
[p.  loo].  It  is  an  important  element  in  the  question  of 
the  development  of  aggregated  capital,  and  it  must  be 
carefully  watched  by  the  people.  The  learned  Profes- 
sor suggests  no  remedy  for  the  possible  evil. 

"  (7)  The  mental  tone  of  the  business  community 
may  be  lowered  by  depriving  individuals  of  the  privi- 
lege and  of  the  power  to  enter  independently  into 
business  as  readily  as  could  be  done  were  capital  less 
concentrated.  It  should  be  borne  in  mind  that  this 
evil,  while  it  exists,  is  offset,  in  part,  by  some  of  the 
advantages  mentioned  above." 

This,  again,  is  hypothetical,  and  until  some  real  case 
is  presented,  the  situation  must  be  left  to  the  operation 
of  natural  laws. 

"  (8)  And,  again,  the  moral  tone  of  business  may 
be  lowered.  If  the  larger  organizations  employ  un- 
scrupulous methods  in  dealing  with  competitors,  or 
customers,  or  laborers,  their  greater  power,  especially 
if  it  is  great  enough  to  give  them  a  partial  or  complete 
monopoly  for  a  time,  will  have  a  much  more  detrime- 
mental  influence  than  the  same  acts  of  an  individual, 
both  on  account  of  the  range  of  its  application  and  of 
the  more  powerful  influence  of  its  example." 

But  no  remedy  is  suggested  to  reach  this  possible  evil 
when  it  arrives,  and  it  must  be  assumed  that  it  is 
thrown  out  merely  as  a  warning  note  to  persons  who  are 
seriously  studying  these  problems. 

"A  reasonable  degree  of  publicity  regarding  both  the 
organization  and  management"  of  corporations  is  ad- 
vocated ;  but  at  the  same  time  caution  is  advised  in  the 
making  of  any  laws. 

Thus  after  twelve  years  of  personal  experience  we 
have  one  single  remedy  suggested  by  Professor  Jenks — 
that  of  publicity!  A  sweeping  comment  upon  the 
drastic  remedies  proposed  by  politicians  and  political 
platforms!    And  yet,  in  a  day,  evils  may  be  revealed  as 


Legislation  105 

flowing  from  these  aggregations,  which  would  require 
remedies  even  beyond  those  suggested  by  demagogues 
bidding  for  temporary  fame  and  poHtical  capital.] 

Assuming  that  you,  gentlemen,  should 
come  to  the  conclusion  that  some  further  law 
was  necessary,  you  are  confronted  Federal  or 
with  a  question  as  to  the  jurisdic-  Legislation, 
tion ;  as  to  whether  it  should  be  a  National  or 
State  law.  This  involves  some  study  as  to 
the  nature  of  our  government,  and  the  true 
relation  of  the  States  to  it.  This  govern 
ment  is  a  federative  government  with  na- 
tional functions.  Whatever  powers  this 
federative  government  has  are  given  to  it  by 
the  Constitution.  The  Constitution  of  the 
United  States  may  be  divided  under  two 
great  heads — namely,  that  part  which  we 
carried  almost  bodily  from  the  English  law, 
and  that  part  which  was  created  to  uphold 
the  federation. 

If  you  will  take  occasion  to  study  this 
great  instrument,  you  will  find  that  the  ex- 
pressions of  individual  rights  in  Magna 
Charta  are  almost  copied  in  the  Constitution 


io6  Commercial  Trusts 

of  the  United  States.  And  if  you  examine 
the  three  foundations  of  the  English  govern- 
ment to-day,  the  Magna  Charta,  the  Petition 
of  Right  and  the  Bill  of  Rights,  you  will  dis- 
cover that  all  of  our  rules  of  liberty,  justice 
and  right,  State  and  National,  have  been 
drawn  from  these  sources.  Whatever  is  new 
in  our  Constitution  is  the  result  of  the  asso- 
ciation of  the  thirteen  States,  by  which  they 
agreed,  for  the  purpose  of  mutual  and  per- 
petual union,  to  delegate  to  a  general  govern- 
ment certain  specified  powers. 

The  idea  of  the  Constitution  of  the  United 
States  was  that  the  general  government 
should  never  interfere  with  any  of  the  re- 
served internal  affairs  of  the  States.  The 
government  wanted  just  power  enough  to 
protect  itself  from  the  exterior  influences,  and 

to  hold  the  States  together,  and  it  did  not 

* 

propose  to  interfere  with  the  rights  of  the 

States  to  govern  themselves  as  to  their  in- 
ternal affairs,  any  more  than  the  respective 
States  undertook  to  interfere  in  the  domestic 
relations  or  private  affairs  of  any  of  its  citizens. 


Legislation  107 

If  you  keep  that  idea  in  mind,  you  can  in- 
telligently approach  the  question  whether  the 
Federal  Government  has  the  right  to  interfere 
in  the  general  questions  of  aggregated  capital. 

The  necessity  for  some  such  provision,  as 
the  present  ''commerce  clause"  in  the  Con- 
stitution, was  one  of  the  controlling  causes 
for  calling  the  convention,  which  led  to  the 
adoption  of  that  instrument.  When  we 
separated  from  England,  the  great  difficulty 
was  the  want  of  uniformity,  in  the  commerce 
and  navigation  laws. 

In  the  Articles  of  Confederation,  which 
preceded  the  Constitution  of  the  United 
States,  there  was  nothing  which  made  com- 
merce free,  open  and  uniform,  between  the 
States;  and  when  they  received  their  inde- 
pendence, the  question  of  an  untrammelled 
commercial  intercourse,  between  the  States 
of  the  Union,  was  one  of  the  principal  sub- 
jects which  confronted  the  people.  That 
clause  of  the  Constitution  of  the  United 
States  by  which  Congress  was  given  the  power 
to  regulate  commerce — I  say  this  with  great 


io8  Commercial  Trusts 

confidence — was  never  intended  as  an  abso- 
lute authority  for  the  general  government  to 
interfere  or  meddle  with  the  internal  affairs 
of  the  States. 

The  phrase  ''regulate  commerce"  does  not 
mean  to  restrain  commerce,  and  never  was 
intended  to  have  such  meaning.  In  plac- 
ing this  language  in  the  Constitution  there 
was  no  thought  of  interfering  with  the  de- 
velopment of  the  country.  The  framers 
only  undertook  to  say  this:  that  the  States 
should  not  deprive  each  other  of  that  free 
and  absolute  intercourse  between  themselves 
which  must  necessarily  exist  for  the  purpose 
of  accomplishing  the  purposes  of  the  Union. 
That  was  the  intention.  They  said  all  of 
the  navigable  waters  must  be  open  to  all  the 
States;  no  impediments  placed  in  the  great 
highways  and  roads,  and  no  restrictions 
made  upon  trade  and  commerce  as  between 
them.  The  citizens  of  South  Carolina,  so 
far  as  the  navigable  waters  and  roads,  and 
everything  that  appertained  to  commerce, 
were  concerned,  should  enjoy  the  same  equal- 


Legislation  109 

ities  and  privileges  that  a  citizen  of    New 
York  possessed. 

In  the  first  case  which  arose  in  the  Supreme 
Court  of  the  United  States,  Gibbons  vs.  Og- 
den,*  under  this  commerce  clause  of  the 
Constitution,  the  question  was  this:  Liv- 
ingstone and  Fulton,  who  were  then  apply- 
ing steam  to  water  navigation,  had  received 
from  the  Legislature  of  New  York,  a  grant 
for  the  exclusive  use  of  steam,  in  the  navi- 
gable waters  of  New  York  State,  for  a  term 
of  years.  Well,  that  was  a  privilege  that 
nobody  envied  them  in  receiving;  because 
Livingstone  and  Fulton  were  applying  a  new 
and  great  discovery  to  the  propulsion  of 
boats,  and  the  State  gave  them  the  sole  privi- 
lege of  enjoying  this  valuable  invention. 
But  they  had  no  sooner  obtained  this  grant 
from  the  State  of  New  York,  than  another 
individual,  started  a  line  of  steamboats  from 
New  Jersey,  and  ran  over  to  New  York,  and 
he  was  seized.  He  was.  under  a  license  of 
the  United  States  Government,  regulating 
*  9  Wheaton's  Rep.,  i. 


no  Commercial  Trusts 

the  coasting  trade,  and  the  question  arose 
in  the  Supreme  Court  of  the  United  States, 
whether  the  State  of  New  York  had  the 
power  to  grant  such  an  exclusive  privilege, 
to  the  exclusion  of  citizens  of  other  States 
navigating  under  coasting  licenses.  The 
opinion  of  Chief  Justice  Marshall,  delivered 
in  this  case,  has  been  universally  read  and 
studied,  and  he  held,  that  it  was  one  of  the 
objects,  of  the  commerce  clause  of  the  Con- 
stitution, to  open  the  navigable  waters,  to 
all  citizens  of  other  States,  and  that  the 
grant  to  Livingstone  and  Fulton  was  in- 
operative. 

"The  genius  and  character  of  the  whole  gov- 
ernment seem  to  be  that  its  action  is  to  be  ap- 
plied to  all  the  external  concerns  of  the  nation, 
and  to  those  internal  concerns  which  affect  the 
States  generally;  but  not  to  those  which  are 
completely  within  a  particular  State,  which  do 
not  affect  other  States,  and  with  which  it  is  not 
necessary  to  interfere  for  the  purpose  of  exe- 
cuting some  of  the  general  powers  of  the  govern- 
ment. The  completely  internal  commerce  of 
a  State,  then,  may  be  considered  as  reserved 
for  the  State  itself." 


Legislation  1 1 1 

This  language  of  Chief  Justice  Marshall  fur- 
nishes the  keynote  to  this  much  discussed 
clause  of  the  Constitution. 

Of  course,  the  Supreme  Court  of  the 
United  States — I  say  it  with  great  regret 
— has  been  remarkably  harassed  and  an- 
noyed in  its  decisions  upon  this  clause.  I 
do  not  think  any  man  can  sit  down  and  study 
the  decisions  of  that  Court  upon  the  inter- 
state commerce  clause,  without  rising  from 
the  reading,  with  a  feeling  that  they  are  very 
inconsistent  in  some  respects;  and  Judge 
Bradley,  in  one  of  his  decisions  * — and  cer- 
tainly Judge  Bradley  was  a  very  able  law- 
yer— expressed  a  regret  that  the  Court  had 
strayed  so  far  away  from  the  principles  of 
Gibbons  vs.  Ogden,  from  which  I  have  just 
quoted. 

The  judges  of  the  Supreme  Court  of  the 
United  States  are  human,  and  they  are 
more  or  less  susceptible  to  the  influence  of 
outside  opinion,  and  discussion,  as  others  are. 
Law,  after  all,  is  nothing  but  the  expression 

♦Leloup  vs.  Mobile,  127  U.  S.  Rep.,  640. 


112         .  Commercial  Trusts 

of  custom.  Despite  the  fact  that  legisla- 
tures undertake  to  put  in  statutory  form, 
laws  for  the  government  of  the  people — that 
which  is  the  great  law,  and  that  which  is  the 
universal  law,  is  the  law  of  custom ;  and  the 
Supreme  Court  judges,  like  all  other  human 
beings,  are  susceptible  to  the  influences  that 
prevail  at  the  time  they  write  their  decisions 
— honest,  high-toned,  intelligent,  proud  of 
their  position  in  every  way,  but  still  human, 
as  you  can  see,  if  you  take  the  Legal  Tender 
cases,  where  they  made  two  decisions,  one 
in  favor  of  legal  tenders,  and  one  against 
them,  and  if  you  take  the  Income  Tax  cases, 
and  other  instances — few,  I  am  glad  to  say 
— you  will  see  that  that  Court  is  influenced 
very  largely  by  the  prevailing  popular  opin- 
ion. They  breathe  the  same  air,  they  live 
under  the  same  influences  as  other  people 
do ;  and  when  a  question  of  law  is  presented 
there,  they  are  susceptible,  more  or  less,  to 
the  atmosphere  which  prevails,  and  every- 
body must  recognize  that  indisputable  hu- 
man frailty. 


Legislation  113 

I  say,  therefore,  that  Congress  should  not 
put  upon  that  Court  unnecessary  burdens,  as 
they  have  done  by  the  Sherman  Act.  It 
was  a  crude  piece  of  legislation  at  best,  and 
that  Court  has  endeavored,  in  an  honorable 
and  conscientious  way,  to  extricate  itself 
from  it,  as  much  as  it  can;  but  it  would 
have  been  much  better,  in  my  judgment,  if 
that  law  had  never  been  enacted,  because  it 
imnecessarily  attempts  to  deprive  the  States 
of  power  which  they  alone  should  exercise ; 
it  is  another  innovation  of  the  general  gov- 
ernment— it  is  another  unnecessary  step 
towards  centralization. 

Gentlemen,  the  strict  State  rights  doc- 
trine has  been  largely  obscured  since  the 
war  of  1 86 1,  because  many  issues,  state  Rights, 
which  were  involved  in  it,  disappeared, 
when  that  unhappy  epoch  in  our  history 
closed. 

But  the  subject,  of  the  relation  of  the 
Federal  Government  to  the  States,  is  still 
one  of  the  profoundest  importance,  and  it 
should  always  be  kept  alive  and  green,  before 


114  Commercial  Trusts 

us,  when  legislation,  of  the  kind  involved 
in  this  discussion,  is  contemplated. 

I  do  not  assert  these  views  as  the  result 
of  political  and  partisan  bias,  but  they  are 
influenced  by  independent  thought  and  con- 
viction. As  Mr.  Gladstone  says,  if  we  can 
preserve  it,  as  it  has  been  handed  down  to 
us,  there  is  not  ''the  slightest  doubt  about 
our  political  equality  and  our  progress  and 
development." 

State  rights  is  not  a  party  question.  It 
has  disappeared  from  the  realm  of  partisan 
politics,  and  when  you  are  inquiring  into  the 
legality  of  business  carried  on  by  manufac- 
turing corporations  incorporated  under  State 
laws,  and  the  question  of  restricting  or  limit- 
ing them,  you  must  be  warned  not  to  en- 
croach upon  the  authority  of  the  various 
States;  and  it  is  very  important,  that  con- 
scientious study  should  be  bestowed  upon 
this  important  subject,  before  Federal  legis- 
lation is  granted.  It  is  unfortunately  true, 
that  lately  we  are  tending  to  nationalization. 
It  is  true,  that  in  great  and  small  emergen- 


Legislation  115 

cies,  people  are  turning  to  the  National 
Government  for  help,  for  assistance  and  sup- 
port; but  it  is  equally  true,  in  my  humble 
judgment,  that  such  appeals  should  be  disre- 
garded, and  that  the  fabric  of  this  Govern- 
ment never  can  be  sustained  in  its  pristine 
vigor  and  glory  unless  we  keep  the  identity 
of  the  State  Governments  perfectly  estab- 
lished, as  against  the  Federal  power.  And 
now  that  that  great  bone  of  contention,  sla- 
very, has  disappeared,  we  have  a  chance  to 
look  at  the  question,  from  an  independent 
and  unbiassed  standpoint,  uninfluenced  by 
sectional  or  partisan  politics. 

The  question  of  State  rights  involves  the 
whole  theory  of  our  Government,  and  the 
perpetuation  of  our  republican  institutions. 
It  is  essential,  in  considering  the  subject  of 
making  laws,  to  endeavor  at  all  times  to 
maintain  the  individual  autonomy  of  citizen- 
ship. We  begin  with  the  household,  family 
and  domestic  affairs,  and  we  say  to  the  vil- 
lage, or  town,  or  city,  or  State,  whichever 
undertakes  to  invade  the  privacy  of  these 


ii6  Commercial  Trusts 

relations,  "You  must  keep  your  hands  off." 
As  citizen  members  of  villages,  towns,  cities 
or  municipalities,  we  claim  the  general  right 
to  legislate  for  ourselves,  with  only  so  much 
interference  from  the  State  as  is  necessary 
for  the  general  good  of  the  whole  people, 
and  when  we  come  to  State  citizenship,  we 
claim  that  the  Federal  Government  has  no 
power  over  us,  except  that  which  has  been 
delegated  to  it  by  the  Constitution.  In  any 
legislation  inaugurated  by  the  Federal  Gov- 
ernment, it  is,  therefore,  essential  that  there 
should  be  no  encroachment  upon  the  rights 
of  the  States,  as  they  are  preserved  in  the 
Constitution.  In  State  legislation,  as  against 
municipalities,  cities,  towns  and  villages,  it 
is  equally  important  that  the  rights  of  these 
smaller  communities  should  not  be  invaded, 
and  the  same  reasoning  applies  to  the  inva- 
sion of  individual,  domestic,  family  or 
business  affairs,  by  the  National  or  State  Gov- 
ernment, or  by  any  of  the  minor  municipal- 
ities. 

Looking  at  the  subject,  therefore,  in  the 


Legislation  1 1 7 

light  of  every  fact,  which  I  have  been  able 
to  discover,  I  see  no  reason  why  there  should 
be  any  national  legislation  in  respect  to  this 
question  of  aggregated  capital. 

In  regard  to  State  legislation,  you  are 
charged  with  suggesting  a  basis  for  homo- 
geneity of  laws  upon  this  subject.  Nothing 
appeals  to  me  so  strongly  as  that  proposition. 
The  draftsman  of  the  act,  which  created  your 
Commission,  had  in  view  the  possibility  of 
your  reaching  a  conclusion  upon  which  you 
could  not  conscientiously  recommend  na- 
tional legislation ;  but  he  has  carefully  given 
you  the  power  to  make  recommendations 
by  which  homogeneity  on  this  subject  be- 
tween all  the  States  could  be  established — 
similar  laws  framed  on  the  same  line;  the 
States  to  take  up  this  great  question  and 
legislate  in  a  uniform  way.  A  recommen- 
dation, emanating  from  this  Commission, 
ought  to  have  the  profoundest  weight  in  all 
the  States,  especially  if  it  is  accompanied 
by  reasoning  which  appeals  to  intelligent 
men. 


ii8  Commercial  Trusts 

If  such  a  homogeneity  can  be  obtained,  I 
will  not  dwell  here  upon  its  profound  political 
significance,  as  tending  to  a  community  of 
interests  and  legislation  between  the  people 
of  all  the  States,  and  thereby  sinking  still 
deeper  the  foundations  of  that  kind  of 
"union"  contemplated  by  the  framers  of 
the  Constitution. 

Therefore,  I  submit  that  if  you  recom- 
mend legislation  at  all,  it  can  only  be  in  the 
shape  of  proposals  to  the  different  States. 
And  if  it  is  true  that  any  corporation  in  this 
country — I  do  not  care  which  corporation 
it  is — is  in  possession  of  franchises,  or  is  in 
possession  of  rights,  or  is  the  holder  of  privi- 
leges which  are  not  granted  to  or  enjoyed 
by  other  corporations  or  individuals,  then  I 
say  if  you  are  satisfied  of  that  fact,  level 
your  legislation  against  it  specifically,  and 
do  it  clearly,  and  the  people  will  applaud 
you,  and  the  courts  can  intelligently  sustain 
you.  • 

As  I  see  the  subject,  without  having  the 
whole  light  before  me  as  you  have,  sitting 


Remedies  Analyzed  119 

here  patiently,  as  you  have  been,  for  months, 
and  gathering  in  all  the  statistics,  facts  and 
opinions,  it  seems  to  me  that  the  le-        Existing 

Remedies  Ap- 

gal  remedies,  in  the  various  States,      pucabie  to 

Corporations 

are  ample  to-day  to  redress  all  Analyzed, 
grievances  which  may  exist,  and  about  which 
I  now  wish  to  talk. 

There  are  three  classes  of  persons  who  are 
interested  in  the  remedies  appertaining  to 
aggregations  of  capital;  first  there  is  the 
Public;  second,  the  State;  and  thirdly,  the 
creditors  and  stockholders. 

Now,  let  me  first  take  up  the  question  of 
the  Public.  There  has  been  much  talk,  and 
it  has  received  sanction  from  the  very  re- 
spectable authority  of  Judge  Howe,  in  his 
formulation  of  the  results  of  the  Chicago 
Trust  Conference  held  in  the  summer  of  1899 ; 
there  is  a  strong  demand  in  favor  of  more 
publicity  in  respect  to  these  industrial  cor- 
porations. 

Well,  let  us  inquire  what  interest  the  Pub- 
lic has  in,  what  I  shall  now  term,  corporate 
wealth  and  corporate  interests.  The  Public — 


I20  Commercial  Trusts 

and  I  mean  by  the  Public  those  persons  who 
have  no  pecuniary  or  contractual  interest  in 
the  corporation — -is  that  class  of  persons  who 
are  interested  in  corporations,  solely  and  be- 
cause corporations  are  created  by  public 
statutes,  and  whose  interests  cannot  extend 
beyond  knowing  that  the  corporation  is  faith- 
ful to  its  charter — to  its  obligations  to  the 
State. 

I  take  issue  with  the  advocates  of  publicity 
here,  and  I  deny  that  it  is  necessary  in  the 
broad  sense  in  which  it  is  demanded.  I  say 
that  no  man  who  is  not  interested  in  a  cor- 
poration has  a  right  to  know  anything  about 
it.  It  is  none  of  his  business.  I  put  that 
proposition  very  boldly.  I  may  be  wrong, 
but  my  views  are  definite — subject  to  change, 
but  at  this  time  well  fixed.  I  repeat  that  if 
you  guard  the  rights  of  stockholders  and 
persons  who  have  contractual  relations  with 
corporations,  and  the  State  continues  its 
paramount  authority  over  the  corporations 
— as  I  shall  show  you  it  possesses — and  the 
corporation  keeps  its  contract  with  the  State 


Remedies  Analyzed  121 

by  strictly  following  its  charter;  then,  and 
in  such  events,  the  public  has  no  more  busi- 
ness in  its  private  concerns  than  it  has  in  the 
private  affairs  of  your  household,  or  your 
fortune,  or  your  own  commercial ;  '^airs. 

The  line  between  the  exercise  of  govern- 
mental rights — now  I  am  speaking  as  if  the 
State  were  offering  to  make  a  law  controlling 
corporations — I  say  that  the  questions  as  to 
where  and  when  the  State  should  legislate, 
and  where  and  when  it  should  not;  as  to 
when  private  rights  intervene,  and  the  State 
should  withdraw;  where  the  State's  right  to 
intervene,  and  the  private  rights  must  yield ; 
are  questions  of  the  greatest  delicacy.  And 
I  do  not  know  that  I  can  do  better  than  to 
quote  to  you  from  Mr.  Burke,  who,  in  my 
opinion,  is  an  authority  on  any  subject  which 
he  has  touched,  at  any  time,  and  in  any  place. 
But  it  is  clear,  that  when  you  come  to  the 
question  as  to  whether  the  State  shall  legis- 
late about  what  concerns  your  domestic  or 
business  relations,  I  say,  unless  the  necessity 
is  overwhelming,  it  ought  to  keep  its  hands 


122  Commercial  Trusts 

off.  You  ought  to  allow  the  autonomy  of 
household  affairs,  and  the  autonomy  of  busi- 
ness, to  exist  in  accordance  with  the  wishes 
of  the  individuals  who  are  interested  in  it; 
and  the  Government  has  no  more  right  to 
interfere  with  your  business  than  it  has  to  go 
into  your  house  and  ask  you  what  you  are 
eating,  or  to  dictate  what  you  shall  eat.  The 
line  between  where  the  State  or  Government 
comes  in,  and  where  the  citizen  ought  to  be 
supreme,  is  clearly  put  by  Mr.  Burke.* 

"It  is  one  of  the  finest  problems  in  legisla- 
tion," says  Mr.  Burke,  "and  what  has  often 
engaged  my  thoughts  whilst  I  followed  that 
profession,  'what  the  State  ought  to  take  upon 
itself  to  direct  by  the  public  wisdom,  and  what 
it  ought  to  leave,  with  as  little  interference  as 
possible,  to  individual  discretion.'  Nothing, 
certainly,  can  be  laid  down  on  the  subject  that 
will  not  admit  of  exceptions,  many  permanent, 
some  occasional.  But  the  clearest  line  of  dis- 
tinction which  I  could  draw,  whilst  I  had  my 
chalk  to  draw  any  line,  was  this;  that  the  State 
ought  to  confine  itself  to  what  regards  the  State, 

*  Burke  on  the  Features  and  Details  of  Scarcity,  at 
page  416.     Rivington  Edition  of  1808. 


Remedies  Analyzed  123 

or  the  creatures  of  the  State,  namely,  the  ex- 
terior establishment  of  its  religion;  its  magis- 
tracy; its  revenue;  its  military  force  by  sea 
and  land ;  the  corporations  that  owe  their  exist- 
ence to  its  fiat  [this  phrase  undoubtedly  means 
public  corporations,  as  private  corporations 
were  not,  at  the  time  this  was  written,  in  exist- 
ence]; in  a  word,  to  everything  that  is  truly 
and  properly  public,  to  the  public  peace,  to 
the  public  safety,  to  the  public  order,  to  the 
public  prosperity.  In  its  preventive  police,  it 
ought  to  be  sparing  of  its  efforts  and  to  employ 
means,  rather  few,  frequent  and  strong,  than 
many,  and  frequent  and,  of  course  as  they  mul- 
tiply their  puny  politic  race,  and  dwindle,  small 
and  feeble.  .  .  .  They  ought  to  know  the 
different  departments  of  things;  what  belongs 
to  laws,  and  what  manners  alone  can  regulate. 
To  these,  great  politicians  may  give  a  leaning, 
but  they  cannot  give  a  law." 

Now  there  are  a  great  many  things  that  the 
State  has  no  right  to  regulate.  There  are  a 
great  many  things  that  the  State  has  no  right 
to  go  into  at  all ;  about  which  it  has  no  right 
to  dictate.  It  has  no  right  to  dictate  to  me 
what  religion  I  shall  follow,  what  I  shall  eat, 
what  I  shall  wear  or  what  business  I  shall 


i24  Commercial  Trusts 

engage  in.  Mark  you,  I  do  not  lay  down  this 
as  an  absolute  proposition,  an  unqualified 
one ;  what  I  mean  is  this,  that  unless  there  is 
some  overwhelming  necessity,  some  apparent 
and  powerful  moving  cause  and  mischief  at 
hand,  the  State  should  keep  its  hands  off, 
that  is  what  I  mean.  But  if  the  mischief  is 
plain;  if  you  feel  that  overwhelming  cause 
forcing  itself  upon  you,  then  you  are  justified 
in  legislation,  and  you  will  find  plenty  of 
authority  for  it,  under  the  police  power  and 
under  every  other  power. 

I  come  back,  then,  to  the  question  of  pub- 
licity, and  I  assert  that  the  public  is  amply 
protected  by  existing  laws.  So  far  as  the 
general  public  is  concerned,  if  it  is  influenced 
or  damaged  or  defrauded  by  any  act  of  a 
corporation,  or  its  directors,  or  its  promoters, 
or  anybody  associated  with  the  enterprise, 
there  is  a  criminal  and  a  civil  legal  remedy, 
full,  complete  and  absolute.  Let  me  illus- 
trate :  If  a  corporation  were  to  issue  a  circu- 
lar, a  prospectus,  which  is  now  becoming  the 
method  of  introducing  new  organizations  to 


Remedies  Analyzed  125 

the  public  and  getting  subscriptions — if  there 
is  put  in  that  prospectus,  any  statement 
which  is  false  and  fraudulent,  it  is  a  founda- 
tion for  a  criminal  indictment.  Here  is  a 
perfect  remedy,  existing  under  the  laws  of 
every  State  in  the  Union.  You  do  not  have 
to  guard  the  public  in  that  respect.  No  ex- 
cuse can  be  found  in  this  respect  for  the  inter- 
vention of  the  State.  If  a  man  puts  his 
money  into  a  corporation  through  the  repre- 
sentations contained  in  the  prospectus,  he 
has  a  civil  remedy  for  damages  in  addition 
to  his  criminal  remedy.  So  that  there  is  no 
possibility  of  anybody  being  defrauded,  or 
cajoled,  or  influenced,  out  of  his  money  rights 
or  property,  by  anything  that  the  corporation, 
or  any  of  its  surrounding  associates,  or  per- 
sons interested  in  it,  can  do,  without  an 
appropriate,  full  and  perfect  remedy. 

I  am  dealing  now  with  the  outside  public, 
before  they  get  into  the  corporation;  and 
I  affirm  that  it  is  utterly  impossible  for 
you  to  conceive  of  a  case,  where  the  pub- 
lic is  swindled,  or  where   the   public   loses 


126  Commercial  Trusts 

money,  by  corporate  action,  unless  there 
are  adequate  civil  and  criminal  remedies. 
Whether  they  are  enforced  or  not  is  another 
question.     Now,  so  much  for  the  public. 

If  the  solicitude  of  those  opponents  of  ag- 
gregated capital  is  based  on  the  fact  that 
they  wish  to  protect  the  public,  then  I  say  to 
them  that  the  public  is  amply  protected; 
they  can  wish  no  further  protection.  A 
superabundance  of  laws  upon  the  same  sub- 
ject confuses  rights,  it  does  not  aid  their  en- 
forcement. I  admit  that  men  have  been, 
are  and  will  continue  to  be  swindled,  fleeced, 
deceived  or  mistaken  in  their  speculations 
and  investments  in  stocks.  But  the  State 
cannot  give  its  citizens  brains  and  judg- 
ment to  guide  them  in  these  matters. 
Therefore  much  of  the  talk  about  publicity 
is  purely  Utopian. 

Now,  let  us  go  a  step  further.  Take  the 
stockholder:  what  are  his  rights ?  The  stock- 
holder of  a  corporation  has  the  absolute  right 
to  open  the  books.  You  need  no  law  on  that 
subject.     The  directors  of  a  corporation  are 


Remedies  Analyzed  127 

trustees  for  the  stockholders,  and  the  books 
of  the  corporation  can  be  opened  to  them, 
through  the  instrumentality  of  a  court  of 
equity,  under  the  powers  that  a  court 
of  equity  inherently  possesses,  or  a  court  of 
common  law,  or  under  statutory  power,  at 
any  reasonable  time  after  any  reasonable  de- 
mand. Their  rights  are  fully  protected,  and 
while  there  may  be  isolated  cases,  where 
stockholders  have  failed  to  get  at  the  books, 
if  you  will  examine  the  cases,  you  will  dis- 
cover the  grounds  of  the  failure.  Persons 
sometimes  buy  stock  for  speculative  objects, 
for  the  purpose  of  finding  out  what  is  going 
on  in  a  certain  corporation,  and  for  no  other 
motive.  Lord  Ellenborough  said  to  a  man 
who  was  in  court,  in  the  case  which  I  cited 
from  East*s  Reports,  "You  have  not  clean 
hands ;  you  came  into  this  suit  speculatively ; 
you  have  bought  into  this  corporation  for  the 
purpose  of  making  this  examination  " ;  and  in 
such  instances  as  these  the  courts  refuse  to 
allow  examinations  of  corporate  books  to  be 
made.     But  every  bona  fide  holder  of  stock 


128  Commercial  Trusts 

has  the  right  to  open  the  books  of  the  corpora- 
tion, and  every  court  in  this  country  will  aid 
him  to  do  it,  and  if  they  do  not — if  there  is 
anything  incomplete  in  the  remedy  in  that 
respect — I  say  make  it  so ;  it  ought  to  be  so ; 
but  if  you  study  the  question,  I  say  that  you 
will  be  satisfied  that  a  complete  remedy 
already  exists.  If  you  want  homogeneity 
in  the  rules  of  the  different  States,  that  is 
another  matter. 

Therefore,  so  far  as  the  stockholder  is  con- 
cerned, his  rights  are  amply  protected  at  law 
or  in  equity. 

Now,  let  us  come  to  the  State.  Here  is 
where  the  principal  question  arises,  and  I 
will  not  differ,  with  the  most  radical  exponent 
of  the  doctrines  of  anti-aggregation  of  capital 
upon  this  question.  The  State  is  the  crea- 
tor of  the  corporation.  The  State  dictates 
the  terms  upon  which  the  corporate  charter 
is  granted.  The  charter  makes  the  corpora- 
tion a  quasi  public  body.  The  State  has  the 
absolute  right,  not  only  to  make  examina- 
tions, but  it  has  the  right  to  extinguish  the 


Remedies  Analyzed  129 

charter,  as  you  would  extinguish  the  flame  of 
a  candle.  It  can  destroy  the  life  of  a  corpora- 
tion at  any  moment ;  because  the  condition  in 
the  Constitution  of  all  the  States  now  is  that 
the  States  reserve  the  right  to  revoke  all 
charters.  Not  only  that,  but  the  State  has, 
what  we  call  in  equity,  a  visitatorial  power. 
It  has  the  power  through  its  attorney-general 
of  visiting  a  corporation,  inquiring  into  its 
methods  of  doing  business,  and  making  a 
thorough  examination  of  its  books,  and  of  its 
accounts  and  its  business,  if  sufficient  justifi- 
cation exists  to  warrant  such  a  course.  So 
that  the  States  are  not  deficient  in  power; 
and  the  cry  of  publicity,  in  my  estimation,  is 
entirely  unwarranted  by  the  law  and  facts. 
But  if  you  were  to  make  a  law  by  which  the 
whole  public  could  pass  through  the  office  of 
a  corporation,  and  look  at  its  affairs,  as  you 
would  pass  through  a  street  and  look  through 
the  windows  into  an  office,  to  discover  what 
was  going  on  there — I  say  that  such  a  license, 
to  the  general  public,   would  be  infringing 

the  rights  of  the  corporation — it  would  be 
9 


130  Commercial  Trusts 

infringing  individual  rights;  you  would  be 
guilty  of  transcending  the  power  of  govern- 
ment, unless  you  had,  as  I  say,  some  over- 
whelming, powerful,  good,  substantial  motive 
to  do  it.  With  the  law  as  it  is  to-day,  giving 
the  State  transcendental  powers  over  cor- 
porations, protecting  stockholders  and  credi- 
tors, and  the  public  as  well,  I  believe  that  the 
cry  of  publicity  has  no  foundation  to  rest 
upon. 

Now,  one  more  thought.  Some  persons, 
I  think,  have  an  idea  that  these  aggregations 
Should  Cor-    of  capital  should  be  extinguished 

porations  be 

Prohibited?  — wiped  out.  They  make  a  war- 
fare against  capital,  and  their  aim  is  appar- 
ently to  exterminate  it  as  something  offensive 
to  the  smell,  to  the  eye,  and  to  the  touch — 
something  repulsive  to  the  senses,  something 
which  should  be  blotted  out  of  existence,  as 
unholy  and  pernicious,  and  vile  and  evil. 
Gentlemen,  where  will  such  legislation  lead 
to?  Have  the  opponents  of  capital  reflected 
upon  the  consequences  of  such  an  act  ?  Cer- 
tainly they  have  not,  or  they  would  not  for 


Prohibition  of  Corporations    131 

one  moment  dream  of  legislation  of  that 
kind.  Why,  who  constitute  the  corpora- 
tions, and  where  would  such  legislation  lead? 
Legislating  against  corporations!  You  are 
legislating  against  yourselves.  To-day  every 
large  corporation  in  this  country  has  thou- 
sands of  stockholders,  and  every  substantial 
blow  aimed  against  corporations  is  a  blow 
aimed  against  the  middlemen,  the  men  of 
small  means,  the  conservative  men,  the  thou- 
sands and  thousands  of  stockholders  who 
have  invested  their  money  in  these  corpora- 
tions, the  young  and  old,  the  widow  and  the 
infant,  the  trustee  and  the  executor.  Do 
these  people  imagine  for  one  instant  that 
they  strike  a  blow  at  the  millionaire  in  bat- 
tering down  corporations?  Will  they  suc- 
ceed in  stripping  these  great  millionaires  of 
their  wealth  when  they  legislate  against 
corporations?  Never!  The  millionaires  can 
take  care  of  themselves,  and  do  it.  They 
do  not  hold  their  millions  and  millions  of  dol- 
lars in  these  large  corporations.  And  when 
you  hear  of  this  banking  house,  or  that  bank- 


132  Commercial  Trusts 

ing  house,  taking  ten  or  fifteen  or  twenty 
millions  of  dollars  of  bonds  or  stocks,  why, 
it  only  means  that  it  is  the  source  through 
which  the  stock  and  bonds  reach  the  public. 

The  great  banking  interests,  the  great 
promoters  of  these  commercial  enterprises, 
retain  but  comparatively  small  interests  in 
these  colossal  industrial  corporations,  and 
when  legislation  is  made  against  them,  re- 
member that  you  are  striking  at  your  fellow- 
citizens  whom  you  are  meeting  every  day; 
the  man  of  conservative  wealth,  or  the  man 
who  has  put  his  little  savings  into  corpora- 
tions to  enable  him  to  support  his  wife  and 
children.  It  is  a  cruel  mistake,  not  to 
say  blunder,  to  discuss  these  questions  upon 
the  lines  of  wiping  out  capital  and  exter- 
minating it.     It  is  as  senseless  as  impossible. 

One  more  thought  and  I  shall  close.  In 
connection  with  this  crusade  against  aggre- 
Theinfiu.      gated  capital  it  is  fashionable  to 

ences  and 

Necessity  of  cry  out  against  individual  wealth. 

Protecting 

Wealth.        There     is     not    in    the    political 
history  of  this  country  any  appeal  so  dem- 


Protection  of  Wealth         133 

agogic,  unnatural,  unfounded  and  unsus- 
tainable as  that  which  is  made  against 
wealth.  The  instinct  of  envy,  or  the  worst 
passions  of  prejudice,  or  demagogism  and 
ignorance,  lie  at  the  base  of  such  appeals. 
That  you  and  I  have  not  been  fortunate 
enough  to  accumulate  wealth,  is  no  reason 
why  we  should  undertake  to  criticise,  and 
find  fault  with,  those  who  have  gotten  it 
legitimately,  much  less  to  seek  to  deprive 
them  of  it. 

Respect  for  the  goods  and  property  of 
others  is  the  basis  of  human  society.  It  is 
demanded  by  social  duty;  it  is  inspired  by 
good  manners;  it  is  inculcated  by  divine 
rule ;  and  should  be  rigidly  enforced  by  civil 
law  and  authority.  The  professional  agita- 
tors in  this  country  should  understand,  that 
the  free  and  unlimited  opportunities,  induce- 
ments and  openings  of  business  and  wealth 
to  its  individual  citizens,  constitute  one  of 
the  strongest  arguments  in  favor  of  a  repub- 
lic, and  are  at  the  same  time  its  main 
foundations.     The  incentive  to  wealth  is  an 


134  Commercial  Trusts 

honorable  and  useful  ambition  for  the 
citizens  of  any  government  to  possess,  because 
acquisition  of  wealth  requires  intelligence, 
shrewdness,  conservatism,  self-denial  and 
the  exercise  of  all  those  human  and  moral 
qualities  and  functions  which  are  beneficial 
to  society.  It  is  a  primary  object  of  every 
well-founded  government  to  encourage  the 
acquisition  of  individual  fortunes,  as  it  is 
one  of  its  most  sacred  duties  to  guard  them 
for  its  possessors  when  they  have  been  law- 
fully and  honestly  earned.  To  encourage 
men  to  toil  and  labor,  in  all  the  fields  of 
human  industry,  means  the  development 
and  prosperity  of  the  nation;  it  means  the 
opening  of  new  fields  of  occupation  to  the 
poor,  needy  and  unemployed ;  it  encourages 
men  to  tremendous  and  sometimes  super- 
human efforts  of  skill  and  energy.  The  con- 
sciousness that  the  rewards  they  reap  as  the 
result  of  their  own  exertions,  whether  in 
money  or  in  any  other  kind  of  property,  will 
be  carefully  guarded  by  the  state  for  their 
own  benefit  and  the  benefit  of  their  posterity, 


Protection  of  Wealth         135 

is  the  great  motive  which  impels  men  to 
strive  mightily  in  the  different  fields  of  busi- 
ness activity.  Nor  should  wealth  be  driven 
from  an  active  participation  in  the  political 
life  of  the  nation.  As  a  matter  of  right  and 
justice  and  policy,  it  should  have  its  proper 
place  in  the  councils  of  the  government. 
As  Mr.  Lecky  *  says : 

"The  indissoluble  connection  of  the  enjoy- 
ment and  dignity  of  property  with  the  discharge 
of  public  duties  was  the  pre-eminent  merit  of 
feudalism,  and  it  is  one  of  the  special  excellen- 
cies of  English  institutions  that  they  have  in 
a  great  measure  preserved  this  connection, 
notwithstanding  the  necessary  dissolution  of 
the  feudal  system." 

It  constitutes  one  of  the  greatest  elements 
of  stability,  conservatism  and  intelligence, 
and  while  I  have  the  contempt  that  is  shared 
by  most  of  my  fellow-citizens  for  the  osten- 
tatious display  of  fortunes,  the  flaunting  of 
wealth  before  the  public  with  brutal  vulgar- 
ity, I  do  contend  that  most  of  the  individuals 

*  Lecky's  History,  England  in  the  Eighteenth  Cen- 
tury. 


13^  Commercial  Trusts 

who  have  acquired  wealth  in  this  country, 
are  entitled  to  be  respected,  and  it  is  not 
only  their  right,  but  it  is  their  duty  to  insist 
upon  exercising  a  fair  and  proper  share  in 
the  government  of  the  country.  The  road 
to  fortune  is  open  to  us  all,  and  if  we  have 
not  individually  been  successful  enough  to 
acquire  a  great  amount  of  property,  we 
should  not  seek  to  belittle  the  men  who  have 
been  more  fortunate,  or  to  seek  in  any  way 
to  deprive  them  of  it,  or  diminish  its  impor- 
tance or  enjoyment.  The  lives  and  achieve- 
ments of  the  men  who  have  acquired  wealth 
in  this  country  form  one  of  the  most  interest- 
ing chapters  of  history.  Who  are  the  men 
who  occupy  the  elegant  residences  on  Fifth 
Avenue,  and  on  other  avenues  of  the  great 
cities  of  the  country?  Not  men  who  were 
bom  into  the  world  with  large  means;  but 
men  who  from  their  infancy  were  thrown 
out  upon  their  own  resources,  and  by  hard 
work,  skill  and  luck,  have  acquired  fortunes. 
It  should  be  a  matter  of  pride,  to  point  out 
these  men,  as  types  of  American  citizenship, 


Protection  of  Wealth         137 

and  as  proper  incentives  to  young  people  of 
the  present  age.  Any  onslaught,  premedi- 
tated or  otherwise,  made  upon  the  property 
of  such  a  class  of  people,  is  not  only  sense- 
less and  ridiculous,  but  aims  at  the  whole 
root  of  the  social  organization. 

The  American  nation  is  neither  in  its  de- 
cline, nor  in  its  dotage.  Men  may  climb 
into  prominence,  on  the  steps  of  temporary 
argument,  and  unfounded  appeals  to  passion 
and  prejudice.  Demagogism  may  tempo- 
rarily capture  the  multitude,  but  the  Ameri- 
can people  cannot  always  be  deceived.  Those 
who  seek  to  allure  the  laboring  and  agricul- 
tural classes,  or  others,  into  the  approval  of 
schemes  which  have  not  the  sanction  of 
good  sense,  history,  judgment  and  constitu- 
tional law,  will  sooner  or  later  come  to  grief. 


■:^ 


UNIVERSITY 


14  DAY  T7<sP 

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QUESTIONS  OF  THE   DAY. 


AUTHOR  iMDbA  TO  THE 


"QUESTIONS  OF  THE  DAY"  SERIES. 


Alexander,  E.  P.,  No.  36 

Atkinson,  E.,  No.  40 

Bagehot,  W.,  No.  28 

Baker,  C.  W.,  No. 

Blair,  L.  H.,  No. 

Bourne,  E.  G, 

Codman,  ^ 

Cowles,   ^     0^789 

Croo^' 

Dc>' 


82 
No.  43 

,   _..as.  A.,  Nos.  92,  93 

Gordon,  A.  C,  No.  85 
Grinnell,  W.  M.,  No.  95 
Hall,  B.,  No.  71  ^ 

Hendrick,  P.,  No.  96    #    ^\, 
Wheeler,  E. 


Hitchcock,  H.,  No.  37 
Jacobi,  M.  P.,  No.  80 
Jones,  W.  H.,  No.  39 
Juglar,  C,  No.  75 
Lawton,  G.  W.,  No.   25 
Lowell,  J.  S.,  No.   76 
Palm,  A.  J.,  No.  66 
Remsen,  D.  S.,  No.   77 
Rogers,  J.'  lE.  T.,  No.  23 
Schoenhof,  J.,  Nos.  9,  30,  73,  86 
Shearman,  Thos.  G.,  No.  '^i 
Sherman,  Hon.  P.,  No.  65 
Shriver,  E.  J.,  No.  63 
Stokes,  A.  P.,  No.   79 
Storey,  M.,  No.  58 
Swan,  C.  H.,  No.  91 
Taussig,  F.  W.,  Nos.  47,  74 
Tourg^,  A.  W.,  No.  88 
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P.,  No.  84 


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